Ethena in Trouble? ENA Price Falls 35% as Focus Turns to Upcoming Meme

Tim Hakki

Last updated:

April 19, 2024 at 16:37 GMT+3

| 3 min read

Source: Ethena

The governance token for synthetic dollar protocol Ethena (ENA) has shed 33% over the last week as it begins Friday morning UTC trading at $0.9632.

While this is one of the heaviest intra-week losses for a top 100 cryptocurrency, ENA looks set for a quick recovery. In the last 24 hours it has grown in price by about 10%.

These figures reflect a more volatile token than the market leaders. Bitcoin (BTC) and Ethereum (ETH) declined by 9% and 12% respectively.

The original cryptocurrency and the only coin with a market cap above a trillion, Bitcoin, recovered 5% in the last 24 hours. Ethereum, the coin underpinning the most commercially important blockchain, recaptured about 4% overnight.

Ethena: A Primer.

Central to Ethena’s ecosystem is the token, USDe, a stablecoin that stays pegged to the greenback through a delta-hedging strategy. The protocol uses Bitcoin and Ethereum as reserves, and offsets their price fluctuations around by holding perpetual futures shorting both assets.

One of the popular uses of USDe is staking. According to the official website, there is around $2.4 billion total value locked (TVL) on the platform between nearly 160,000 users. The current annual yield is about 11.2%. This is a seven-day rolling average, although the figure is sharp decline from yesterday, when yield was 17.2%.

However, a new report by CryptoQuant warned USDe holders yesterday that Ethena’s keep rate (the portion of revenue allocated to its reserve fund) needs to stay above 32% in a bear market to avoid risks.

ENA began trading on April 2 at around 79 cents and its price chart since tells a story of relative stability as the token maintains support at a dollar. The highest ENA climbed was $1.52 on April 11, but today’s price represents a 37% pullback. With a Relative Strength Index (RSI) of 66 and climbing, investors appear to be buying today.

Source: TradingView

Ethena (ENA) and Unbacked Stablecoins: Risky Territory?

The Ethena protocol appears to be one of the most cutting-edge and fastest-growing crypto ecosystems in recent history. However, the promise of a stablecoin that is not backed by cash and cash equivalents has more than a few investors wary.

That’s because the industry has seen it all before with Terraform Labs’s UST,...

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