Analyzing Ethena from a Business Perspective: Rebound After Big Dump, Is ENA Worth Investing In?

Introduction

Ethena is one of the few phenomenon-level DeFi projects in this cycle, with its token's circulating market value once exceeding $2 billion after its launch. However, since April of this year, its token price has rapidly fallen, with Ethena's circulating market value retracting by more than 80% at most.

After entering September, Ethena accelerated its cooperation with various projects, expanding the usage scenarios of its stablecoin USDE. The scale of the stablecoin also began to rebound from its lowest point of 400 million USD in September to around 1 billion USD currently.

This article will focus on the following three issues:

1. Current Business Level: Ethena's current core business metrics, including scale, revenue, cost, and profit level.
2. Future Business Outlook: The Promising Narrative and Future Development of Ethena
3. Valuation Level: Is the current price of ENA in the undervalued range?

1. Business Level: The current core business situation of Ethena

1.1 Ethena's business model

Ethena is positioned as a synthetic dollar project with "native yield", and its business model is basically similar to other stablecoin projects:

1. Raise funds, issue stablecoins, expand balance sheet
2. Use the raised funds for financial operations to generate profits.

When the profits generated by operational funds exceed the fundraising and operating costs, the project is profitable.

As a latecomer, Ethena is at a disadvantage in terms of network effects and brand trust, which is specifically reflected in higher fundraising costs. Ethena raises funds by providing users with ENA token incentives and stablecoin yields.

1.2 Ethena's core business data

1.2.1 USDE issuance scale and distribution

After reaching a new high of 3.61 billion in early July 2024, the issuance scale of USDE has continued to decline to 2.41 billion by mid-October, and is currently rebounding, standing at approximately 2.72 billion as of October 31.

64% of USDE is currently staked, with an APY of 13%. The main purpose for most users holding USDE is to earn investment income.

During the same period, the yield on short-term US Treasury bonds was 4.25%, the deposit rate of USDT on Aave was 3.9%, and USDC was 4.64%. It can be seen that Ethena is still maintaining a relatively high fundraising cost to expand its fundraising scale.

USDE is not only issued on the Ethereum mainnet but also expands on multiple L2 and L1 chains. Currently, the scale of USDE issued on other chains is 226 million, accounting for about 8.3% of the total.

Bybit, as an important partner platform, supports USDE as margin for derivatives trading and offers high yields for deposited USDE. Bybit is one of the largest custodians of USDE, currently holding 263 million USDE.

1.2.2 Protocol Revenue and Underlying Asset Distribution

Ethena's current sources of protocol revenue are three:

1. The yield of staked ETH among underlying assets
2. Funding rates and basis income generated from derivatives hedging arbitrage
3. Stablecoin Financial Management Returns

Recently, Ethena's monthly revenue has seen a Rebound, with the protocol income for October reaching $10.63 million, a month-on-month growth of 84.5%.

The distribution ratio of protocol revenue has been adjusted multiple times after its launch, initially allocating most to the reserve fund, then shifting towards staking users to stabilize the USDE scale, and only recently has more revenue started flowing into the reserve fund.

From the perspective of underlying assets, 52% are BTC arbitrage positions, 21% are ETH arbitrage positions, 11% are ETH staking asset arbitrage positions, and 16% are stablecoins. The main source of profit comes from BTC-dominated arbitrage positions.

The average return rate of BTC and ETH perpetual contract arbitrage has rebounded in the fourth quarter, with an annualized return rate currently above 8%.

The SOL, which is about to be included as an underlying asset, currently has no significant advantages in contract scale and yield compared to BTC and ETH, making it difficult to bring in much incremental income in the short term.

1.2.3 Ethena's protocol expenditure and profit levels

Ethena's protocol expenses are divided into two categories:

1. Financial expenditure: paid to stakers through USDE
2. Marketing expenses: Paid to participating users through ENA tokens.

Since the launch of Ethena until now, roughly calculated total protocol expenditure by October 31, (.

• Financial expenditure: 81.647 million USD
• Marketing expenses: approximately $910 million
• Total income from the agreement during the same period: 124 million USD

In fact, Ethena's net loss has reached $868 million by the end of October this year. This is the cost of achieving a market capitalization of $2.7 billion for USDE within a year.

![Business Analysis of Ethena: big dump of 80% followed by Rebound, is ENA worth buying?])https://img-cdn.gateio.im/webp-social/moments-6186bf544f40a8dd8ca341a47d7fe9d0.webp(

![Business Analysis of Ethena: big dump of 80% followed by Rebound, is ENA worth buying?])https://img-cdn.gateio.im/webp-social/moments-a98e004430383d9c2ebab7eb40303c82.webp(

2. Future Business Outlook: The Promising Narrative and Future Development of Ethena

Recently, ENA has achieved nearly a 100% Rebound from its low, mainly driven by the following factors:

• The optimistic expectation of the crypto market is conducive to the increase in perpetual arbitrage yield.
• The Ethena ecosystem project is being launched successively, increasing the airdrop income of ENA.
• Ethena self-operated public chain launch expectations

The most important thing for Ethena is that USDE can be accepted as collateral and trading assets by more top exchanges. Currently, Bybit has deep cooperation, OKX has some possibility, but the chances of Binance and Coinbase accepting USDE are relatively low.

![Business Analysis of Ethena: big dump of 80% followed by Rebound, is ENA worth buying?])https://img-cdn.gateio.im/webp-social/moments-054ec322d0350c0bc4100eefb1001759.webp01

3. Valuation Level: Is the current price of ENA undervalued?

( 3.1 Qualitative Analysis

Bullish factors:

• The market rebound has led to an increase in arbitrage profits.
• Incorporate SOL as the underlying asset to attract attention from the SOL ecosystem
• Ecological projects are being launched one after another, bringing airdrops.
• The project party has a motive to manipulate the coin price

Adverse factors:

• ENA lacks actual revenue distribution
• The project's actual profit situation is not good.
• Facing significant inflation pressure in the next six months

) 3.2 Quantitative Comparison

Compared to the leading stablecoin MakerDAO:

• The income/FDV ratio of Ethena is 1.42%, MakerDAO is 11.49%
• The profit/FDV ratio of Ethena is -30.93%, while MakerDAO is 7.73%.

It can be seen that compared to MakerDAO, Ethena's current price does not have a clear cost-performance advantage.

![Business Analysis of Ethena: big dump of 80% followed by Rebound, is ENA worth buying?]###https://img-cdn.gateio.im/webp-social/moments-96b749f372265c3753b0555875de4981.webp###

Summary

Although Ethena is regarded as an innovative project, its core business model is no different from other stablecoin projects. It is currently in a stage of significant losses and is not as "very profitable" as some opinions claim. Its valuation is also not underestimated compared to MakerDAO.

Ethena shows strong business development capabilities, and rapid scale expansion may drive the price of the coin up, forming a positive feedback loop. However, this growth model will eventually face a critical point, requiring time to verify the stability of its product architecture and its survival ability after subsidy decline.