Ethena Labs, the creators of USDe, have recently announced the incorporation of Bitcoin (BTC) as backing into their synthetic dollar-pegged offering. This strategic move aims to scale USDe’s supply beyond its current $2 billion mark. The team emphasized BTC’s role in enhancing USDe’s scalability, pointing out its increasing open interest in major exchanges.
BTC has seen a significant surge in open interest from $10 billion to $25 billion over the past year, outpacing the growth of Ethereum (ETH) derivatives. Ethena Labs recognized BTC’s superior liquidity and scalability for delta hedging, providing a more secure environment for USDe users. Additionally, historical data shows that BTC has displayed resilience during bear markets, outperforming ETH in terms of funding yields.
To maintain USDe’s peg, Ethena uses a delta hedging approach within the derivatives market. This strategy may involve holding short positions in Ether or ETH-related derivatives, which can yield gains if the asset’s value decreases. Through this method, Ethena can mitigate most of the downward fluctuations in USDe’s collateral.
USDe was initially launched on the Ethereum blockchain on February 19, offering a 27.6% annual percentage yield (APY) on staked USDe. Despite reaching a peak of 113% APY on March 5, the yield has since dropped to 7.15%. Before the integration of BTC, USDe was primarily backed by ETH, Tether (USDT), and Ether-based liquid staking tokens. These assets were sourced from various exchanges, with Binance, ByBit, and OKX contributing the majority of the collateral.
With the integration of BTC, Ethena Labs aims to strengthen USDe’s backing, providing a safer and more reliable product for its users. This move aligns with the company’s vision for the second season of the Sats Campaign, focusing on expanding BTC integration. Users will now have transparent access to BTC backing positions through Ethena’s dashboards, enhancing the overall transparency and security of the USDe ecosystem.
Ethena Labs’ decision to incorporate Bitcoin as backing for USDe signifies a significant step towards enhancing the stability and scalability of the synthetic dollar-pegged offering. By leveraging BTC’s superior liquidity, historical resilience, and delta hedging strategies, USDe aims to provide a more secure environment for its users while maintaining its peg in the derivatives market.
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