Capital Manipulation or Real Adoption? Analyzing the Growth Dilemma of the Ethena Stablecoin Ecosystem

In August 2023, a lending protocol offered an annual yield of 8% for DAI, attracting a large influx of funds. A well-known investor accumulated 230,000 stETH, once accounting for more than 15% of the protocol's deposits. This forced the relevant parties to urgently propose a reduction of the interest rate to 5%.

The subsidy program originally aimed at increasing the usage of DAI nearly became a high-yield tool for a single investor.

As the time arrives in July 2025, Ethena cleverly employs the "coin-stock-bond" treasury strategy, rapidly increasing the APY of sUSDe to around 12%, with ENA surging by 20% in a single day.

This treasury strategy originating from the Bitcoin ecosystem is ultimately fully realized on USDe. Ethena once again utilizes the capital market, successfully creating a dual flywheel effect of ENA and USDe in the on-chain market and stock market.

Survival Challenges of Dual-Currency System

In the stablecoin market, USDT pioneered the way, USDC won user trust with compliance, while USDe became the new favorite of capital.

When the Ethena treasury strategy was launched, it was容易被误认为是对当前Strategy风潮的简单模仿。However, a careful analysis reveals that Ethena is actually trying to break the inherent dilemma of the "dual-coin" system.

This dilemma refers to the fact that on-chain stablecoin issuers often struggle to balance the price of protocol tokens and the market share of stablecoins.

• A lending platform chose to push its token to rise 83.4% within three months, but its stablecoin issuance was only 300 million.
• A certain DAO derivative project's token rose by 43.2% within three months, with a stablecoin issuance of 7.5 billion USD.
• Ethena's ENA rose 94.2% in three months, with a USDe issuance of 7.6 billion dollars.

In addition to the previously collapsed Luna-UST dual token system, it is evident that maintaining balance between the two is extremely difficult. The root cause lies in the limited protocol revenue; if it leans towards market share, the token price becomes unstable, and vice versa.

Ethena shares ENA as a profit "option" with exchange partners through an incentive mechanism, temporarily appeasing large holders, investors, and exchanges, while prioritizing the dividend rights of USDe holders.

According to a research institution's calculations, Ethena has shared approximately $400 million in profits with USDe holders in the form of sUSDe since its establishment, surpassing the entry threshold set by USDT/USDC.

Ethena has not only surpassed certain competitors in the stablecoin market share but has also outperformed some established platforms in the main token project performance, and this is no coincidence.

The rise in ENA prices is certainly stimulated by certain factors from some exchanges, but Ethena is deeply transforming the value transmission method of the dual-coin system by introducing stock market treasury strategies.

While prioritizing the protection of USDe's market share, ENA's dividend rights still need to be fulfilled. Ethena's choice is to launch StablecoinX by mimicking treasury strategies, but with modifications.

Unlike other treasury strategies, ENA's StablecoinX is ostensibly an on-chain entity investment and fundraising, spending $260 million to purchase 8% of ENA's circulating supply, stimulating the rise of ENA's price through a hand-to-hand transfer.

The market reacted positively, with Ethena TVL, USDe supply, and sUSDe APY rising accordingly. It is worth noting that sUSDe is essentially the protocol's liability, while the sales revenue from ENA is the profit.

StablecoinX stimulates the rise of secondary market sales by reducing the circulation of ENA, where the communication costs are controllable, and Ethena only needs to negotiate with major investors.

Ethena follows a capital operation route and stands out in the fierce competition of the dual-coin system. This may be the largest stablecoin innovation after the collapse of a certain stablecoin.

Real applications still need to develop

When the false prosperity is shattered, those deep-rooted problems will come to the surface.

The rise of ENA is one of the sources of project profits, and the holdings of USDe/sUSDe will also increase accordingly. Currently, USDe is expected to become a true application-based stablecoin.

The treasury strategy of ENA draws on other well-known tokens, stimulating the adoption of stablecoins by raising yields, allowing for the earning of volatile returns, while the high control under the negotiation mechanism also alleviates selling pressure during downturns.

However, capital operations can only stimulate the coin price. To maintain the growth flywheel of USDe and ENA, long-term development still relies on the real application of USDe to cover the market-making costs.

Ethena has been making efforts in both off-chain and on-chain directions simultaneously:

On-chain: Collaborate long-term with a certain protocol to actively participate in the on-chain interest rate market, gradually collaborate with other platforms, and simultaneously support an alternative perpetual contract trading platform internally.

Off-chain: In partnership with a major asset management giant to jointly issue an EVM-compatible chain, targeting institutional users; recently also increased the issuance of the compliant stablecoin USDtb in collaboration with a digital asset custody institution.

In addition, some institutions are becoming the new wave of market makers, taking over from the previous well-known market makers.

Although Ethena has performed well in on-chain and off-chain capital operations, its real-world applications still appear to be lacking.

Compared to USDT and USDC, USDe/USDtb is still in its infancy in terms of cross-border payments, tokenized funds, and exchange pricing. The only noteworthy aspect at present is the collaboration with a certain public chain, but partnerships with DeFi protocols are difficult to reach ordinary users.

If Ethena's goal is limited to on-chain DeFi, it has already been quite successful. However, if it aims to enter the off-chain institutional and retail markets, it is clear that there is still a long way to go.

In addition, ENA also faces potential risks. The fee switch mechanism is about to be activated, which requires ENA holders to share profits through sENA. This means that ENA will also become a debt of Ethena rather than income.

Only by truly becoming a stablecoin similar to USDT/USDC can ENA enter a real self-sustaining cycle. Currently, Ethena is still continuously adjusting its strategy, and pressure always exists.

Future Outlook

Ethena's capital operations have inspired other stablecoin and interest-bearing stablecoin projects. Even compliant payment stablecoins can consider interest accrual through RWA on the blockchain.

After Ethena, other projects have also announced the activation of the fee switch protocol, but they will not actually distribute profits to token holders for the time being. After all, the premise for profit sharing from protocol revenue is to have sufficient income.

A well-known DEX has been cautious about the fee switch for many years, with the core goal of maximizing protocol revenue between liquidity providers and token holders. However, most yield-generating stablecoin projects currently lack sustainable profitability.

Capital stimulation can be likened to a pacemaker, while real applications are the hematopoietic proteins. The future development of Ethena and other stablecoin projects will depend on how they balance short-term stimulation with long-term value creation.