The ENA token saw a significant price increase yesterday when Ethena announced an update to its reward system. Following the news, Ethena’s token rose by more than 20 percent.
After the update, users who stake the USDe stablecoin will receive 50% more points in Ethena’s points program. The more points a user collects, the better the probability of receiving ENA tokens in future airdrops.
To benefit from this new update, users must lock up at least 50% of their USDe holdings. The points program allows a lock-in period of at least seven days.
Ethena’s market capitalization has doubled in a week, indicating growing investor interest in Ethena and its ENA token. Ethena is, in fact, the fastest-growing stablecoin in history!
USDe is the fastest growing USD denominated asset in the history of crypto pic.twitter.com/xgiRJjf96t
— G | Ethena (@leptokurtic_) April 8, 2024
ENA is a governance token launched on the market only a week ago. The token’s price has increased by more than 150 percent from the bottom of the opening day.
What is Ethena?
Ethena is a synthetic dollar protocol running on the Ethereum platform. Ethena offers a new type of stablecoin, USDe. Unlike traditional stablecoins, USDe is not backed by fiat currencies or US Treasuries.
Ethena is a synthetic stablecoin that maintains its dollar peg with a delta-neutral position built from its reserves. Thanks to this positioning, the protocol generates a high yield for its owners (i.e., stakers).
Ethena works as follows:
- Users deposit Ether or stablecoins into the system and mint USDe
- Users can stake the USDe to get yield
- Ethena builds a long- and short-position at the same time of the reserves, which generates a yield
- Shorting is very profitable in a bull market because traders with long positions pay up to 20-30% annual interest on their positions
Last week, Ethena also added Bitcoin as a collateral. When writing the article, the collateral positions were ETH 36%, BTC 27%, ETHlst 17%, and USDT 19%.
There is a need in the crypto market for a stablecoin that does not depend on the traditional banking system. Even though stablecoins have emerged as essential tools in the crypto ecosystem, they are still tied to conventional systems due to collateral. This creates risks such as storage issues and regulatory challenges.
The risk of the Ethena protocol is the same as that of all new protocols: How can we ensure it works correctly and there are no bugs? How can we ensure it cannot be misused or the funds hacked?
Investors still remember the collapse of the stablecoin Terra USD, so not everyone is excited about the Ethena protocol.
Summary
- The ENA token experienced a significant price increase when Ethena updated its reward system.
- Users who stake at least 50% of their own USDe have a higher chance of getting ENA tokens in future airdrops.
- The crypto market is wary of Ethena, as most investors still remember the collapse of Terra USD.