Crypto Bull Market Is a Rising Tide Lifting All Boats, Especially Ethena

The ongoing bull market is boosting almost all crypto-related investments, but it’s especially helping synthetic dollar provider Ethena. That’s because increases in sentiment have boosted the fees paid by traders betting prices will increase to people betting prices will fall, leading to a jump in both the staking reward yield and market cap of Ethena’s flagship product USDe.

Bitcoin’s funding rates across Binance, BitMEX, Bybit, Deribit, HTX Global, and OKX are currently converging at nearly 0.02%. They previously reached a seven-month high of just under 0.04% on Monday, data from blockchain analytics firm CryptoQuant shows.

Funding rates refer to the fees traders holding long positions in future derivatives markets on exchanges pay to those holding short positions. A positive funding rate indicates that traders who are betting BTC’s price will increase are dominant.

Charlie Booth, who does growth at blockchain analytics ParSec, wrote in a research note on Friday that the rise in funding rates “points to a significant increase in leverage.” As a result, the activity by traders on centralized exchanges “is having some 2nd order effects onchain and is presenting particularly strong tailwinds for Ethena with the sUSDe yield approaching 30%,” Booth wrote.

The annual percentage yield to stake USDe currently sits at 29%, after jumping as high as almost 90% on Monday, a threshold that hasn’t been crossed since March. For USDe, the yield comes from the revenue generated by Ethena from staking ETH, as well as the funding rate earned by Ethena for opening short derivative positions.

With BTC climbing to an all-time high of $93,477 two days ago and pro-crypto president-elect Donald Trump preparing for his inauguration, traders have opened up substantial leverage on their long positions, boosting Ethena’s yield.

Coinciding with traders increasing their leveraged positions, Ethena’s USDe has returned to a market cap of $3 billion this week, making it the fourth largest US dollar-pegged stablecoin.

The synthetic dollar protocol benefiting from the current crypto bull market comes as the Ethena Foundation, the nonprofit dedicated to the synthetic dollar provider, announced on Friday that the protocol’s risk committee approved a fee switch to redirect Ethena revenue to token holders of ENA, which was initially proposed nine days ago by crypto market maker Wintermute.

“The Foundation will be working with the Risk Committee to crystallize parameters for fee switch activation by 30th November, with precise implementation mechanics to follow,” the Ethena Foundation said in a statement on X.

Meanwhile, Aave governance members are voting to enable users to borrow larger amounts of alternative stablecoins against their staked USDe (sUSDe) collateral, potentially attracting more liquidity as well as increasing the lending protocol’s utilization and revenue. One motivation behind the vote to improve capital efficiency for these borrowers stems from the token’s high utilization, the governance portal stated.

The price of Ethena’s governance token ENA has increased 12% in the last seven days and 52% in the past 14 days, giving the cryptocurrency a market cap of $1.6 billion, per CoinGecko.