Ethena Faces Market Shift Amid Bybit Theft, But Secures $100M Funding for Future Growth

Ethena, a rapidly growing venture in decentralized finance (DeFi) that is known for its USDe stablecoin, has recently been weathering a storm.

The theft of funds from the Bybit exchange has caused Ethena’s share of USDe derivative hedging positions on the platform to plummet. At present, Ethena has a mere 14% of its USDe positions on Bybit. Prior to this, Ethena had 21% of its USDe hedging positions on Bybit. A close second for an equally notable decrease comes from their share of USDe derivatives hedging positions that are backed by ETH, which just lost 65% of its hedging positioning.

This change in positioning occurs when Ethena is already experiencing major operations fluctuations.

In just the last 24 hours, Ethena-associated addresses have withdrawn a substantial 22.64 million USDe, reflecting uncertain market dynamics surrounding the project. The nearly $100 million funding round led by top-tier investors could provide the necessary runway for Ethena to resolve its operational issues.

In recent weeks, Ethena has seen development in the form of something most projects can only dream of—successful fundraising. The project raised $100 million from a consortium of well-known investors and some new names as well, including F-Prime, the venture arm of Fidelity that has never shied away from the crypto space, Franklin Templeton, Pantera Capital, and Polychain.

Amid these changes, Ethena’s USDe stablecoin keeps growing. USDe was once a relatively niche stablecoin, but now it ranks third in stablecoins by market cap—an impressive ascent for a crypto project that only a year ago was best known for rewarding users with up to 30% in APY. Yes, you read that right—30%. At a time when some other stablecoins have been in the news for imploding, Ethena’s has been in the news for its substantially rising market cap. On debates surrounding those returns, I will say this: unless Ethena has found some magic formula for low-vol, high-yield that the markets haven’t otherwise discovered, such returns in stablecoin terms are probably only maintainable over the long haul if either some high-risk offsetting strategy is used or no returns are then actually generated.

Despite the concern that has been raised within the community from the recent events surrounding Bybit and the associated withdrawal issues, Ethena is pressing ahead with its plans. The project is undertaking an audacious initiative in what it terms a “next chapter” by building its own blockchain.

This initiative, according to Ethena, is part of a more overarching strategy to move toward a further decentralized ecosystem—one in which Ethena itself has “more control over the protocol’s future.” (This, of course, is an attempt to use the term “decentralized” in a more positive context than it has recently achieved.) Building its own blockchain also means that Ethena will “reduce reliance on third-party platforms and exchanges like Bybit while creating a more robust (and secure) environment for users.”

Building a proprietary blockchain holds the potential for Ethena to greatly improve the scalability and efficiency of its decentralized finance (DeFi) infrastructure. If Ethena needs this new blockchain to position itself as a real contender in the DeFi space, with an infrastructure that is more self-sustaining and decentralized (and thus more trustworthy from a user perspective) than what it currently has, it will also need to somehow condense the next few years into the next few months.

The recent decline in the share of USDe derivatives hedging positions on Bybit, alongside our significant withdrawal activity, has prompted some to question the immediate future of Ethena. Yet the firm locked down a $100 million commitment from a cadre of some of the most reputable names in the investment world, which surely suggests something quite different. Since USDe now ranks as the third-largest stablecoin by market cap, keeping an eye on the long-term success of Ethena seems only prudent.

Even with the difficulties and worries about the elevated yields and the latest market turns, Ethena’s choice to construct its own blockchain shows its dedication to a not-so-distant tomorrow. Were its efforts to be successful, Ethena’s new blockchain could solidity significantly and very visibly this whole ecosystem, making it—by far, if not altogether—the most stable, credible offering among the projected-use cases for blockchains.

In the future, Ethena’s success will hinge on how well it tackles the problems of the Bybit theft, continues to draw investors to its high-yield offerings, and deals with the intricacies of creating and rolling out a new blockchain. As the DeFi world keeps shifting and changing, Ethena’s staying power in this area will depend on its continued ability to adapt and innovate.

Ethena is in a tough spot. Its share of derivatives hedging positions on Bybit has dropped significantly, and it’s had millions of USDe withdrawn from its associated addresses. But despite that, Ethena’s secured a whopping $100 million in funding, and it’s using that to make some very interesting moves. It’s building its own blockchain, and it’s coming up with some very intriguing plans for how it want to do that in a decentralized way. So in this next segment, I’m going to put the spotlight on what those plans are, at least the ones I found out about, and what I think the possible implications for those plans are.

Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services.

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