The circulating supply of Ethena's USDe stablecoin has experienced a dramatic 40% decline, falling from nearly $15 billion in early October to approximately $8.5 billion by mid-November. This sharp drop reflects growing trader caution and reduced appetite for high-risk DeFi strategies, driven by ongoing crypto market volatility.
Market instability has severely impacted USDe's appeal, as its unique structure relies on hedging deposits through bearish perpetual futures bets rather than full dollar backing. This ties its value directly to staking profitability, which has been compressed by low or negative funding rates. Amir Hajian, a researcher at Keyrock, explained that yield-driven demand is highly sensitive, and when funding rates drop, stakers earn less, triggering redemptions and slowing growth.
The situation worsened after a $19 billion leveraged wipeout on October 10, compounded by exchange disruptions like those on Binance, leading to heavy redemptions and unwinding of staked positions as APY fell and liquidation risks rose. USDe remains the third-largest dollar-pegged crypto behind USDT and USDC, but its reflexive system amplifies market reactions, making stability challenging during uncertainty.
Recovery prospects hinge on macroeconomic factors, including potential Federal Reserve interest rate cuts and resolution of the U.S. government shutdown. A return to positive funding conditions could restore staker yields, improving USDe's attractiveness and helping Ethena regain market trust. Analysts suggest that broader crypto market stabilization and renewed risk appetite could eventually make USDe competitive again for yield-seeking investors.
UNI
ETH
SOL
AVAX
ADA
BTC
HUGS
MOBU
XRP
LINK
MUTM