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Ethena's Bullish Pump

How is ENA defying a tough crypto market?
Jack Inabinet Jack Inabinet May 8, 20242 min read
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market analysis Ethena's Bullish Pump

Exchange Integrations. Many crypto tokens are finding themselves in the red, but Ethena’s ENA has managed to defy the trend, up nearly 10% to start the week! What is causing ENA’s outperformance, and is the catalyst sustainable?

The ENA/BTC pair established its local bottom this Sunday, the same day Ethena’s Head of Growth tweeted this upcoming week would be big.

Traders front-running the announcement sent ENA rallying against both BTC and the dollar throughout Monday before the token ripped higher early Tuesday morning to hit $1 for the first time in May on the news that its USDe synthetic dollar will be integrated with Bybit, the fourth-largest exchange by futures trading volumes in the month of April.

The partnership will enable spot USDe trading pairs and allow Bybit users to post USDe as perpetuals trading collateral, enabling them to access greater capital efficiency by offsetting a large portion of their funding payments. Additionally, users will be able to supercharge yields by supplying USDe to Bybit earn products.

Should Bybit’s implementation of USDe prove to be a differentiating competitive advantage for traders, it is likely that additional exchanges will embed the synthetic dollar within their own products, providing massive tailwinds for USDe adoption and positioning it to finally compete in the big kids pool with USDT and USDC.

For Ethena to succeed, the demand for long leverage must remain high to keep funding rates elevated, as this is the source from which the Project generates the majority of its yield. Alternatively, compression in funding rates decreases the returns holders can earn, and Ethena incurs a loss when rates go negative.

While high bull market-driven funding rates were supportive for USDe adoption in early 2024, the token’s supply has been down-only since April 13 when crypto markets slipped into a downtrend.

Continued compression in funding rate markets is beginning to suggest that the mania is over for the moment, and although USDe exchange integrations can help bolster demand for the token, they will be unable to save the product should returns drift further downwards.

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Jack Inabinet

Written by Jack Inabinet

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Jack Inabinet is a Senior Analyst with a passion for exploring the bleeding edge of crypto and finance. Prior to joining Bankless, Jack worked as an analyst at HAL Real Estate where he conducted market research and financial analysis for commercial apartment development and acquisition activities in the Seattle region. He graduated from the University of Washington’s Michael G. Foster School of Business and remains based out of the Seattle area.

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