Ethenas USDe Stablecoin Has Seen Almost $100 Million in Redemptions Since Monday

Ethenas USDe stablecoin, also known as the “synthetic dollar,” has seen nearly $100 million in redemptions over the past few days during a massive market selloff that has seen Bitcoin fall below $50,000 and Ethereum give up its 2024 gains. Significant market turbulence likely triggered these redemptions from users, putting some pressure on the protocol. On Monday, over $1 billion in lending trades were liquidated on centralized exchanges and over $400 million on DeFi protocols, marking one of the largest liquidation events of the year.

Meanwhile, USDe managed to maintain its peg to the US dollar. However, its price fluctuated a bit, briefly touching $0.997 before returning to the $1 mark. USDes current supply is over 3.1 billion tokens, up 50% from 2 billion in April. USDe differs from traditional stablecoins in that it uses a mechanism that does not rely on direct collateral in fiat or physical assets. Instead, it uses derivative hedging strategies with collateral positions involving Ether and Bitcoin, as well as an arbitrage system for issuance and redemption to maintain the peg to the US dollar.

Additionally, USDe uses a cash-and-carry strategy to generate returns that are distributed back to stablecoin holders. This strategy includes tactics such as staking ETH collected from those who mint USDe with Ethereum validators while concurrently shorting an equivalent amount of ether futures. Ethena previously allowed ETH or liquid staking tokens to be used as collateral for USDe issuance. Bitcoin has recently become accepted as collateral as well.