Ethena ecosystem enchants

Bitcoin was up a smidgen earlier this morning. Ethereum leaned sideways. Solana staged a little rally. 

But the fattened-up coin at which to gawk right now has to be Ethena (ENA), the day-old governance token of Ethena Labs, creators of a controversial stablecoin protocol.

ENA, in its first full day of changing hands on centralized exchanges, already has a market capitalization in excess of $1.3 billion, making it the 88th-largest coin in terms of market cap size, per CoinGecko.

Yesterday's debut was a whirlwind with ENA's price gusting northerly, from an early low of $0.53 to as high as $0.95 only a few hours ago.

On Wednesday, as of 7:45 a.m. (EST), ENA was $0.93, up 56.6% in 24 hours, per CoinGecko. The rise of the Ethena governance token was accompanied by an airdrop as well as the expansion of USDe, a yield-earning stablecoin that Ethena introduced to be a crypto-native, much more decentralized, secure, reliable means of exchange in the volatile crypto realm. How that gets achieved has some skeptics howling.

To produce collateral to nurture the collective assurance that USDe is sufficiently backed by a stable asset base, Ethena leverages ETH and also staked ETH, a version of ETH that’s locked up on the network, supporting operations, earning rewards. These are in one sense tangible assets but "are not real dollars stored in a bank account," as Decrypt explains. "Instead, they are cryptos locked in pools."

Some in the industry are comparing this adventure to Terra's doomed bid to create a decentralized stablecoin.

However, USDe is considered a hybrid of decentralized and centralized mechanisms. Ultimately, though, USDe is hitched to the whims of the spot market for ETH, often beholden to the fortunes of BTC, which sometimes gets blown about by unpredictable macro forces, such as stubbornly high interest rates (that, as it turns out, might not get cut until late this year).

Critics have taken aim at the Ethena protocol's extra layers of risk, and at its reliance on delta hedging which can involve auto-triggered short selling. Also raising hackles is Ethena’s use of a complex, circuitous Off-Exchange Settlement (OES) approach to reconciliation, a daunting labyrinth of transfers among myriad counterparties and custodians.

"The USDe coin’s approach has been deemed quite risky," Decrypt said.

It's certainly the case that the trajectory of ETH has fluctuated in recent weeks. 

The second-largest crypto crossed $4,000 early last month but yesterday at one point ETH looked like it might drop below $3,200.

As of 8:21 a.m. (EST), ETH was $3,322, a portrait of stability over 24 hours (+0.0%).

Total crypto assets sit at $2.63 trillion on a gain of 1.4% since yesterday at this time.

For the second straight day, the ARK 21Shares Bitcoin ETF (ARKB) experienced outflows.

On April 1, ARKB shed $300,000, a seemingly token amount but noteworthy in that the fledgling fund hadn't yet notched a daily net asset exit.

Yesterday, the fund saw a net outflow of $87M. That amount actually even topped the outflow ($82M) experienced by Grayscale’s GBTC.

Wait a minute … GBTC only lost $82M yesterday?

Are we talking about the same GBTC that shed an average of $254 million per day over the past five trading days?

All told, Grayscale's 11-week-old converted vehicle has hemorrhaged $15 billion.

"Tuesday was a relatively low outflow day for GBTC," Cointelegraph said.

On a day when the Ethena stablecoin ecosystem boldly pushed outward in the face of naysayers galore, we also have witnessed, amidst a crypto stall-out, a vast expansion of the cumulative supply of USDT, USDC and DAI, the three biggest stablecoins. Together, the trio of digital-to-fiat market linchpins boast a combined value of $141.42 billion, the highest amount since May of 2022. Stablecoin growth is a key representation of liquidity.

"The data indicates that capital continues to flow into the crypto market," Reflexivity Research said.

"Dip demand for BTC could be strong, and the broader uptrend may soon resume," CoinDesk added.

Meanwhile, risk-asset markets seem to be reconsidering notions of rates going lower, possibly a reason why the trajectory of the largest crypto has been stymied in the past several days. BTC has declined 6% since last Wednesday.

Boding well for crypto is the general sense, confirmed by some surveys, that institutional adoption is on the rise now that spot ETFs exist.

And although BTC was above $70K just on Easter, and despite the fact that there's this long-awaited halving event coming around the bend, in three or so weeks, traders still seem cautious. This reticence could owe to the combination of "market dynamics and regulatory developments, as well as the downward trend affecting BTC’s trajectory," CoinGape said.

Michaël van de Poppe, a popular analyst, describes BTC's surrender of its $69K handle as a turning point.

"Crucial area lost for Bitcoin," he said. "We'll not see a new ATH pre-halving unless $69K breaks."