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    Ethena’s USDe surpasses Sky’s DAI to become the third largest stablecoin

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    Ethena’s stablecoin, USDe, has overtaken Sky’s DAI to become the third largest stablecoin by market value. USDe now has a value of less than $6 billion, according to data from DefiLlama, but trails behind Tether’s USDt and USD Coin. Meanwhile, DAI’s value has fallen from its peak of $7 billion in 2022 to around $4.5 billion. Users have been drawn to Ethena’s CeDeFi yield strategy, which offers double-digit annual percentage rates, but it’s not without its risks. Despite this, some have adopted USDe, including crypto trading desk Wintermute and DeFi lender Aave.

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    Did you know that Ethena, a decentralized finance (DeFi) service, now has the third-largest stablecoin in the game? Their currency, called USDe, has just beat out Sky’s Dai (DAI) in market value, according to DefiLlama. While that’s quite a feat, the USDe, valued at less than $6 billion, is still way behind the top dogs, Tether’s USDt and USD Coin, which boast market values of roughly $140 billion and $40 billion respectively.

    Meanwhile, since its peak value of $7 billion in 2022, the value of DAI, Sky’s flagship stablecoin, has fallen to around $4.5 billion. But don’t forget, the total market value of all stablecoins is just over $200 billion!

    Launched in February, USDe quickly attracted billions of dollars from stablecoin holders chasing double-digit annual percentage rates (APRs) from Ethena’s CeDeFi yield strategy, which combines DeFi smart contracts and trading in offchain derivatives. The key here is that CeDeFi is a method that mixes elements of DeFi and trading on centralized exchanges (known as CEXs).

    According to a recent note from cryptocurrency researcher Messari, USDe holders have enjoyed an average annual return of 17.5% since February 2024, even reaching 55.9% at the top and 4.3% at the bottom. As of December 12th, anyone staking their USDe, also known as sUSDe, is getting roughly 24% in annual returns.

    On a simplistic level, Ethena’s strategy allows users to create USDe using other tokens such as Bitcoin, Ether, liquid staking tokens, and other stablecoins. They then lessen the volatility in your portfolio using offchain financial derivatives. As great as it sounds, Messari warns that this strategy comes with risks, such as failed exchanges, custodians, and settlement providers.

    Despite these risks, a lot of people are getting behind USDe. Just this October, Wintermute, a cryptocurrency trading desk, started accepting USDe as trading collateral. Even Aave, a giant in the DeFi lending world, integrated with sUSDe in June and it’s now the fastest-growing asset on their platform. In fact, in the year 2024, Ethena managed to rake in approximately $200 million in fees.

    Ethena’s specific token, the ENA (ENA), has gained around 5x in value since June. And let’s not forget about Maker. They rebranded as Sky in August and made changes to Dai, rebranding the decentralized stablecoin as USDS. This revamp, however, attracted some criticism due to cyber security concerns and possible asset freezes. So, as always, remember to do your research and proceed with caution in the crypto world!

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