Sky Protocol Expands USDS Supply

Sky Protocol’s synthetic stablecoin, USDS, has increased its supply ahead of Ethena’s USDe, despite a slowing Ethereum (ETH) market.

Sky Protocol is expanding the supply of USDS, which is now ahead of Ethena’s USDe that was burned due to deteriorating market conditions. Ethena’s stablecoin supply has been adjusted as strategies shift with the bearish trend in the ETH market.

Both USDe and USDS have unique roles among stablecoins. Recently, USDe was at the forefront, while Sky Protocol’s USDS was expanding its influence. The recent change in supply dynamics indicates new competitiveness in the DeFi (Decentralized Finance) space.

The recent supply switch occurred in the past month, with Ethena’s USDe holding more than 46% of the synthetic stablecoin market at the end of 2024. Now, USDS is gaining traction and recognition against USDe in this evolving market landscape.

Ethena has reduced its USDe supply due to market challenges, lowering it from over 6 billion tokens to 5.4 billion as a countermeasure to declining market conditions. This move aims to enhance Ethena’s resilience against the weakening crypto market, where it has been adversely affected by a drop in overall funding fees, which constitute its primary revenue source.

Expansion of USDS Influence

Sky Protocol currently possesses a total of 4.9 billion USDS tokens, transitioning from DAI. With a total supply exceeding 8.4 billion tokens across various MVP vaults, USDS is solidifying its standing.

As a rebranded MakerDAO, Sky Protocol has made significant strides, including expanding USDS across various chains and protocols. Since January, USDS has proliferated on platforms like Base and Solana while its activity on Ethereum has declined.

Despite a decrease in earnings, USDS maintains passive income at 6.5%, down from a previous peak of 12.5%. Sky Protocol is actively adjusting its savings rate in response to market fluctuations, demonstrating adaptability in the current economic climate.

Sky Protocol Surpassing Ethena Revenues

Sky Protocol’s revenue performance has surpassed that of Ethena recently. Ethena has seen its weekly revenues drop from over $21 million at the peak of 2024 to around $3 million in the first quarter. Conversely, while Sky Protocol’s weekly fees reached over $13 million in December, they have remained healthy at over $8 million despite overall market sluggishness.

Even with the overall bearish sentiment in the DeFi sector regarding token values and dominance, protocols continue vying for engagement and liquidity. The MKR token showed resilience, bouncing back to recent highs, while the ENA token hovered around $0.36 within its yearly range.

Ultimately, the DeFi ecosystem remains closely tied to Ethereum, presenting risks associated with lending protocols and collateral valuations as ETH trades below $1,900.