Ethena Labs Enhances USDe with Bitcoin for Expansion

Ethena Labs recently announced a strategic move to back it’s USDe with Bitcoin, aiming to enhance scalability and safety.

Bitcoin was included as a backing asset for Ethena Labs’ USD synthetic dollar, according to the announcement made by the company. X transmitted the DeFi protocol throughout Thursday.

They intend to improve the scalability of their dollar-pegged coin, as well as its level of safety. This strategic move allows USDe to expand to more than 2.5 times its existing capacity.

This action is a response to traders’ growing interest in Bitcoin over Ethereum-based derivatives. In making this decision, Bitcoin’s higher liquidity and hedging benefits were considered.

Ethena Labs highlighted Bitcoin’s favorable liquidity and duration profile for delta hedging. When it was first introduced, USDe exclusively depended on ether liquid staking tokens as its backing.

This change is a reflection of a more significant market trend that favors trades involving Bitcoin. The increased interest in Bitcoin by token holders is influencing Ethena’s approach.

Over the past year, the open interest in Bitcoin has significantly expanded, increasing by 150% to $25 billion. Under this growth, USD’s capacity for expansion has doubled.

Ethena Labs Chooses Bitcoin Over Ether Backing

On the other hand, Ether’s open interest indicated an increase of one hundred percent, reaching $10 billion. The difference in demand dynamics between Bitcoin and Ether supports Ethena’s strategic pivot, highlighting the rationale behind the decision.

The market performance of Bitcoin continues to be strong, as evidenced by its current price of $68,026, which represents a 3.3% increase in only 24 hours.

Additionally, Ethena Labs has partnered with Ceffu to improve off-exchange settlement and liquidity. As a result of this collaboration, the MirrorX solution has been integrated with Binance Exchange ever since Ethena was made available to the public in February 2024.

This service enables institutional clients like Ethena to benefit from frequent derivatives position settlements. Furthermore, it broadens access to a variety of products and markets on Binance.

Intending to foster a trading environment that is more robust and secure, Ethena Labs has undertaken the initiative to back USD with Bitcoin.

The backing of Bitcoin provides more vital support for USDe, which is now valued at around $2 billion. The protocol offers this support as it approaches the implementation scale of $10 billion.

Because of this strategic approach, the scalability of the token, as well as the safety it provides for consumers, will be considerably improved.

The collaboration with Ceffu through the MirrorX solution is another significant step forward in gaining access to controlled liquidity. Guy Young, the Chief Executive Officer of Ethena Labs, stated his excitement about the alliance’s role in improving off-exchange settlements.

MirrorX’s added value in terms of enhancing capital allocation and minimizing exposure to Binance was also stressed by Ian Loh, the executive vice president of Ceffu.

This strategic strategy not only strengthens USDe’s position in the market but also fits with the changing preferences of traders for Bitcoin.