$5.72B Outflows Impact Ethena – Is the ENA Recovery at Risk?

Ethena is facing significant challenges, including a substantial $5.72 billion in net outflows, which are negatively affecting its price and market confidence. This decline is fueled by investor sell-offs, falling revenue, and token unlocks. As ENA struggles to regain strength, there are growing concerns about its future trajectory.

Key Takeaways

Ethena (ENA) is under pressure due to a combination of token unlocks, diminishing revenue, and substantial investor sell-offs.
Net outflows of $5.72 billion and decreasing inflows have weakened Ethena’s Total Value Locked (TVL) and overall market sentiment.
Ethena has seen a considerable market decline, with ENA's value dropping by 10% recently.
The growing bearish trend among investors raises the likelihood of ENA experiencing further declines.

Ethena’s $6B sell-off deepens as revenue and on-chain activity plunge

Impact of $5.7B Sell-offs on ENA

Recent on-chain analysis indicates a rising disinterest among investors, particularly in the last 30 days, leading to increased asset sell-offs as tokens are unlocked. From October 11 to November 12, total net outflows reached $5.72 billion, which has significantly impacted Ethena’s Total Value Locked (TVL), which currently stands at $8.581 billion. Ethena TVL chart. Source: DeFiLlama

According to AMBCrypto, this drop in value may be attributed to a sharp fall in Ethena's earnings. For instance, ENA's average daily earnings fell from $109,462 in the third quarter to just $8,987 in the fourth quarter, indicating persistent challenges in the market as investors withdraw their funds. Maria Carola, CEO of StealthEx, emphasized that macroeconomic variables are influencing ENA's profitability and cautioned that conditions might deteriorate further. “Until inflation indicators and the Federal Reserve’s policy guidance provide clearer direction, high-beta assets like ENA are likely to stay under considerable pressure,” she stated.

Token Unlocks and Falling Revenue Pressure ENA

The recent decline in Ethena’s price can be attributed to intensifying bearish pressure in the market. On November 8, the protocol unlocked tokens valued at $4.56 million, which is approximately 0.2% of its circulating supply, while continuing its S3 Airdrop, releasing around $149,858 daily. These token unlocks have introduced additional selling pressure, particularly during a period where the broader market is attempting recovery.

Additionally, Ethena's protocol revenue has faced a sharp dip, further contributing to the declining market sentiment. Ethena token unlock Source: DeFiLlama

Reports indicate that Ethena's revenue has plummeted in parallel with its valuation, with only $1,817 recorded in the last day and $11,849 over the past week. A decline in protocol revenue typically hints at reduced user activity; fewer users mean lower revenue generation as on-chain activity decreases. Data from Artemis reflects this trend, showing transactions dropped to 24,500 during this timeframe.

Declining Inflows Amid Increased Spot Selling

According to DeFiLlama, USD inflows into ENA have drastically fallen, dropping to a negative $46 million, reinforcing the trend of sell-offs among on-chain investors. This trend is mirrored by spot investors, who are also offloading their ENA holdings, with a total net flow indicating withdrawals of $569,000 from centralized exchanges. Ethena USD inflow. Source: DeFiLlama

This marks a notable period where ENA has faced weekly outflows. Across four major instances of ENA liquidations, an average of $3.915 million worth of the asset has been sold. This trend indicates that if selling continues to dominate the market, total sell-offs could escalate to similar levels, placing added pressure on ENA's market outlook.