Arthur Hayes, everyone knows him, right? He accumulated a total of 16.79M ENA in just two days, making ENA his second-largest holding after Ethereum.
Additionally, according to NANSEN data, Pantera Capital increased its position in $ENA by $8 million in the past 24 hours. This blockchain investment firm has been steadily increasing its $ENA holdings over the past three weeks.
Why do seasoned crypto investors like Hayes and professional institutions choose to increase their holdings of $ENA?
Earlier this year, he dedicated a significant portion of a blog post to discussing USDe. USDe is Ethena's 'synthetic dollar' token, pegged to a price of $1. Hayes believes that Ethena is a revolutionary project addressing the current pain points of stablecoins: USDe stablecoin not only offers a high yield (currently annualized at 25%, previously approaching 30%) but also has an innovative mechanism that resolves Tether's shortcomings in yield distribution and regulatory risks. The yield of USDe comes from collateral staking and perpetual contract funding rates, making this model more attractive than traditional stablecoins. Furthermore, Ethena's team has also received investment from major exchanges like Binance and OKX in the capital markets. Perhaps these reasons prompted him to make significant purchases of ENA tokens recently.
Coincidentally, a recent report from Coindesk shares the same view as Hayes. The yields far exceed those of traditional stablecoins and US Treasury bonds; let's take a look at Ethena's recent market performance and its potential for future development based on this perspective.
Growth Opportunity Analysis
Short-Term Growth Opportunities:
Market Recovery: With the favorable market conditions following Trump's election, the crypto market has surged recently, especially with Bitcoin and Ethereum leading the bull market. In this context, Ethena's USDe stablecoin has attracted a massive influx of funds, drawing in about $1 billion in the past month alone. With Hayes's support, Ethena (ENA) now has a TVL of $4.14 billion, exceeding its historical peak TVL of $3.6 billion by 15%. This indicates that the demand and confidence in USDe are rapidly recovering, and the high yields are attracting investors who are eager for this growth potential.
Aave Integration: USDe becoming an Aave collateral asset means that USDe's use cases and liquidity have been further expanded, creating a 'supply absorption pool.' Ethena's co-founder expects this move will absorb billions in token supply within a month, driving TVL growth.
CEX Support: Two centralized exchanges have added collateral support for USDe, providing greater liquidity and broader market exposure for USDe. Support on CEXs typically boosts investor confidence and enhances trading activity for USDe, helping to promote its TVL increase in the short term.
Mid to Long-Term Growth Opportunities:
Governance Token and Revenue Distribution: Ethena plans to distribute a portion of the protocol's revenue to ENA (governance token) holders, which will enhance the demand for ENA and incentivize more investors to participate in project governance. This mechanism not only ties the value of the governance token but also allows token holders to directly share in the profits generated by Ethena's success. It is worth mentioning that this decision stems from the governance proposal suggested by Wintermute. Hayes is the one who used Wintermute to make significant purchases of ENA; had it not passed, Hayes likely wouldn't have acted so quickly on ENA.
Compliance Benefits Foster Profit-Making Effect: Trump's election is interpreted by the market as potentially bringing a more favorable DeFi regulatory environment, which further boosts market confidence. After all, improvements in macro policy are expected to reduce project compliance risks, making institutional and individual investors willing to enter the market. The entry will inevitably prioritize DeFi. In a recent interview, Vitalik addressed the media's question of 'why the Ethereum ecosystem or the entire Web3 ecosystem still lacks practical application products after so many years.' His answer can be seen as a boon for the DeFi sector, as the profit-making effect is so obvious that he used it as an example. He said, 'One reason for the only successful application being DeFi is that DeFi can make more money.'
Project Feature Analysis
Ethena's USDe token has a unique mechanism that provides a stable source of income for the protocol through collateralization of ETH, stETH, BTC, and liquid stablecoins, combined with the funding rates of perpetual contracts (funding rates and staking rewards). This mechanism is the fundamental value driver of $ENA and is also a significant part that Hayes elaborated on in his blog.
Simply put, Ethena's USDe is like a sturdy aircraft carrier built from a variety of high-quality assets (ETH, stETH, BTC, and liquid stablecoins). These assets serve as its 'hull,' providing a solid foundation. To maintain stable navigation amidst the waves of the crypto market, Ethena has meticulously designed a 'weight system'—holding these collateral assets on one side while establishing hedge positions through perpetual contracts on the other side, allowing the impacts of market fluctuations to offset each other, ensuring smooth sailing.
Not only that, but this aircraft carrier can also 'make money.' Through the asymmetry of market supply and demand (for example, when the funding rate is positive), it earns additional 'navigational income,' further enhancing its economic benefits. At the same time, collateral assets like ETH and BTC become 'more valuable' as prices rise, like thickening the hull, making the aircraft carrier more robust and capable of safely carrying more cargo.
Moreover, as awareness of decentralized finance increases, more capital will flow into DeFi projects. The versatility of USDe (collateral + lending) will make it a popular choice among DeFi users. Aave and new CEX supporting USDe will further expand its liquidity and demand. Therefore, Hayes firmly believes that Ethena, by combining USDe with high-yield staking mechanisms and perpetual contract funding rates, has become a highly competitive (even the best) stablecoin solution in the current DeFi market.
Ethena's recent proposal to change revenue distribution reminds me of some 'classic' DeFi star products. For example, MakerDAO's DAI stablecoin successfully attracted a large number of users and achieved sustained growth through diversified collateral assets and multi-protocol support. Similarly, the Curve protocol has successfully locked in substantial funds by offering high-yield liquidity incentive programs. Like these two products, Ethena relies on innovative yield mechanisms and cross-platform integration to attract capital and incentivizes user participation through governance token mechanisms, further enhancing its market competitiveness. I believe that the significant growth cycles experienced by predecessors are now beginning or have already begun for Ethena.
Hayes's purchase of ENA tokens reflects his recognition of Ethena's potential as a stablecoin and its future market share and revenue opportunities. Therefore, if you are also looking to invest in DeFi projects or understand the stablecoin market, Ethena is undoubtedly a project worth paying attention to.
