Ethena’s USDe Stablecoin Experiences Major Redemptions

Ethena’s USDe stablecoin, known as a “synthetic dollar,” saw nearly $100 million in redemptions recently amid a broader market selloff, with Bitcoin dropping below $50,000 and Ethereum losing its 2024 gains.

Substantial market turbulence likely triggered these redemptions from users, putting some pressure on the protocol. On Monday, over $1 billion in leveraged trades were liquidated across centralized exchanges, alongside over $400 million on DeFi protocols, marking one of the year’s largest liquidation events.

Despite this, USDe maintained its peg to the U.S. dollar, although its price briefly dipped to $0.997 before recovering to around $1, according to The Block’s Ethena Price Page. The current supply of USDe is over 3.1 billion tokens—50% higher than the 2 billion supply in April.

“On the Ethena side, I can confirm there are zero issues with over $50 million of redemptions processed overnight, which is the largest to date,” Ethena founder Guy Young stated on X. “While painful, I hope every stress test like this and others we have been through this year provide additional comfort on the go-forward resilience of the system,” he added.

The $50 million in redemptions are part of a larger trend. According to data from analytics platform Parsec, $96 million of Ethena’s USDe has been redeemed for its underlying collateral assets since Monday amid the crypto sell-off.

USDe differs from traditional stablecoins as it does not rely on direct fiat or tangible asset backing. Instead, it employs derivative hedging strategies with collateral positions in ether and bitcoin, coupled with an arbitrage system for minting and redeeming to maintain its U.S. dollar peg.

Additionally, USDe utilizes a cash-and-carry strategy to generate yields, which are returned to stablecoin holders. This includes tactics such as staking ETH from those who mint USDe with Ethereum validators while simultaneously shorting an equivalent amount of ether futures.

Previously, Ethena allowed ETH or liquid staking tokens as collateral for minting USDe, and recently bitcoin has also been accepted as a collateral option.