Based on the latest data, Ethena’s yield-generating stablecoin, USDE, has experienced a dramatic contraction in supply since July 4, 2024. Over the span of less than two months, its market capitalization has decreased by $770 million.

Ethena’s USDE Supply Plummets as Competition Heats Up

From Aug. 23 to Aug. 30, the stablecoin economy expanded from $169.72 billion to $171.08 billion. Over the past week, the fiat-linked token market saw an uptick of $1.36 billion. However, Ethena’s USDE has been on a downward trajectory since reaching its peak market cap on July 4. Back then, 3.61 billion USDE was in circulation, but since that peak, 770 million coins have been redeemed, bringing the market supply down to 2.84 billion USDE.

USDE market cap over the past three months.

The decline in Ethena’s stablecoin brings it very close to FDUSD’s market cap, and if it dips further, FDUSD could reclaim its spot as the fourth largest stablecoin. Currently, FDUSD’s market cap stands at $2.8 billion. Ethena is also grappling with fierce competition in the yield-bearing stablecoin space, with several new players entering the market.

Competitors include launch announcements from Paxos, Gyroscope, and Elixir, among others. For example, Elixir’s yield-generating stablecoin, DEUSD, has expanded its supply by $124 million in the past 30 days. Additionally, Ethena’s once-impressive 30% to 20% annual percentage yield (APY) has seen a sharp decline. By May 4, 2024, USDE’s yield had fallen to 15.3%, and today, it has dropped even further to just 4.3%.

The future of Ethena’s USDE among the top stablecoin ranks remains uncertain as it navigates a rapidly evolving market. With declining yields and increased competition, Ethena faces the challenge of maintaining its fourth-largest market position. As new entrants gain traction, Ethena’s ability to adapt will be crucial in determining whether it can sustain its role in the stablecoin ecosystem.