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In the last seven days, Ethena has seen notable progress with its stablecoin, USDe, surpassing the $2 billion mark in market value.

USDe now ranks as the fifth largest stablecoin on the market, just behind USDT, USDC, DAI and FDUSD. To surpass the closest competitor, FDUSD, USDe would need to reach a value of more than 3.5 billion dollars.

Unlike other stablecoins, USDe is not directly backed by other cryptocurrencies or fiat currencies. Instead, it maintains its peg to the dollar through an arbitration mechanism that issues and destroys tokens as needed, along with derivatives hedging against collateralized positions.

What makes USDe attractive to investors is its ability to transfer profits from strategies like Ethereum staking to its users, who receive interest payments.

Ethena cresce

However, it is essential to note that these mechanisms, as well as most DeFi protocols, are not without risks. Analysts warn of possible similarities between USDe and the collapse of the Terra-Luna ecosystem in 2022, which resulted in significant losses.

Ethena recognizes these risks and takes steps to minimize them, including geo-blocking and KYC measures. Andre Cronje, co-founder of Fantom, expressed similar concerns regarding USDe’s long-term stability.

“So even though things are going well now (because the market is positive and funding rates for short positions are positive because everyone is happy to go long), eventually this changes, funding becomes negative, the margin/ collateral is liquidated and you end up with an unsupported asset,” Cronje said.

Driven by the current success of USDe, the Ethena governance token (ENA) has seen an increase of over 60% in the last 7 days, topping the list of cryptocurrencies with the highest weekly percentage increase.

The continued development and adoption of USDe, along with future movements in Bitcoin, could influence the behavior of the ENA token in the coming days.

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