Key Takeaways
Ethena's Total Value Locked (TVL) grew by $1.86 billion, the protocol reported on May 17, as its earnings reached a ten-month high on the back of surging demand for its synthetic dollar, USDe.
Data from DefiLlama confirms the protocol generated approximately $605,000 in earnings in the first 17 days of May, the highest since September 2025. "A rising TVL typically signals growing user confidence in the protocol and increasing demand for its products," Olayiwola Dolapo, a research analyst, wrote in a note.
The growth pushed Ethena’s TVL up by nearly $1 billion since April 23, with its USDe supply on the Solana network alone increasing by over $560 million in just five days. This rapid expansion has helped USDe become the third-largest dollar-pegged asset with a market capitalization of approximately $9.5 billion, trailing only Tether’s USDT and Circle’s USDC. The protocol's native token, ENA, was also added to Grayscale's DeFi Fund with a 13.59% weighting on May 7, according to Santiment data.
Despite the strong fundamental growth, derivatives traders are positioning for a potential price decline. While spot investors have accumulated a net $140 million of ENA tokens over the past ten days, data from CoinGlass shows perpetual futures markets have seen a net outflow of $819 million over the same period, indicating a build-up of short positions. The funding rate for ENA perpetuals has turned negative, confirming that short traders are currently in control and paying longs to maintain their positions.
The divergence in market positioning highlights a clash between long-term investors and short-term traders. The $140 million cumulative outflow from spot exchanges points to accumulation, as investors move tokens into self-custody. This bullish behavior is contrasted by the heavy shorting activity in the perpetuals market, where traders are betting on near-term price downside. This pressure could force the ENA price toward a deeper demand zone before a potential upswing.
A key driver of the TVL expansion is the aggressive multi-chain push of its USDe synthetic dollar, particularly on Solana. USDe maintains its peg via a delta-neutral hedging strategy, a different mechanism from traditional stablecoins backed by cash reserves. Users are amplifying their yield exposure through "looping" — depositing USDe, borrowing against it, and redepositing the funds. Solana's low transaction fees make these strategies highly efficient, fueling a cycle of deposits and protocol integrations that drives TVL growth.
The protocol's growth comes as ENA holders await a governance vote on a "fee switch," which would change how protocol revenue is handled. The combination of strong on-chain fundamentals, institutional interest from firms like Grayscale, and the conflicting signals from derivatives markets has placed Ethena at a critical juncture.
This article is for informational purposes only and does not constitute investment advice.
