Ethena faces $1 billion in outflows but USDe token remains stable

Ethena (CRYPTO:ENA), a crypto yield protocol, has seen a significant $1 billion in outflows as the market has cooled.

This reduction has decreased the market cap of its USDe (CRYPTO:USDE) token from $3.6 billion to under $2.7 billion.

The outflows, which began in July, represent a 27% decrease in USDe’s supply, and the protocol’s governance token, ENA, has dropped 85% from its April peak.

The decline is linked to falling funding rates for crypto perpetual futures, a primary source of yield for USDe.

These rates, which were as high as 40%-70% in March, have recently dropped to near-zero.

Julio Moreno, an analyst at CryptoQuant, noted, “Lower funding rates make it less attractive to hold and stake USDe.”

This has decreased the yield offered by USDe from over 50% in March to 4.4%, making it less competitive compared to safer investments.

Despite these challenges, USDe has maintained its $1 peg throughout the downturn.

Guy Young, co-founder and CEO of Ethena Labs, expressed satisfaction with the protocol's performance during the market corrections, stating, “We are pleased with how Ethena has responded to multiple deep market corrections in the last few months.”

He emphasised that stress tests were expected and that indefinite rapid growth was unsustainable.

Ethena’s stability can partly be attributed to its reserve fund, which stands at $45 million, or approximately 1.6% of the current USDe market capitalisation.

Moreno highlighted the importance of monitoring this reserve, noting, “Investors need to watch this key metric to assess Ethena’s risk.”

The protocol continues to manage risks by maintaining this reserve to cover funding rates if necessary.

At the time of writing, the Ethena (ENA) price was $0.222, and the Ethena USDe (USDE) price was $0.9975.