USDe Withdrawals Cut Ethena TVL by 50% After the October 10 Market Crash: What Lies Ahead?

The October market crash severely impacted Ethena, a cryptocurrency protocol, with its total value locked (TVL) plummeting by 50% due to massive outflows from its yield-bearing stablecoin, USDe. While many investors pulled out nearly $8 billion since October, incorporating changes in the crypto landscape, some are seeing potential opportunities in the struggling ENA token.

Key Takeaways

Ethena’s total value locked (TVL) fell from $14.8 billion to $7.4 billion after the October market collapse.
Investors redeemed $5.7 billion from USDe in October alone, with total outflows reaching $8 billion over two months.
Compared to other yield-bearing stablecoins, USDe faced significant outflows, while competitors like sUSDS and syrupUSDC saw increased inflows.
ENA, Ethena’s native token, dropped by 62%, with some investors buying the dip, including cryptocurrency entrepreneur Arthur Hayes.
Despite the decline and subdued interest, there may be future opportunities for recovery in the market.

The Impact of USDe Outflows

Ethena was notably affected by the October market turmoil. The protocol's TVL, heavily reliant on the yield-bearing stablecoin USDe, saw a staggering reduction from $14.8 billion down to $7.4 billion. Investors quickly started pulling out their investments, redeeming approximately $5.7 billion in October alone, and this trend has persisted over the past few months, totaling $8 billion in withdrawals.

Ethena Source: Dune

USDe’s Performance Compared to Other Stablecoins

A deeper analysis of the yield-bearing stablecoin market reveals that USDe was singled out for heavy outflows. Over the last 90 days, while USDe experienced substantial withdrawals, competing products like Sky's sUSDS and Marple's syrupUSDC attracted significant inflows. This indicates a clear investor preference shifting away from USDe during this turbulent period.

Ethena Source: Stable Watch

ENA Token Sees a Price Drop but Sparks New Interest

In light of the market upheaval, many investors shifted their assets away from Ethena’s USDe towards more stable alternatives. This sell-off notably affected the ENA token, which is native to the Ethena protocol; it lost $0.5 and saw a decline of 62%, dropping to below $0.2 in the fourth quarter.

Ethena Source: ENA/USDT, TradingView

Interestingly, trading volumes monitored by the On-Balance Volume (OBV) metric reached unprecedented lows, reflecting a lack of interest in the bearish market. However, these current levels are reminiscent of the lows seen in August 2024, raising the possibility of a discounted opportunity if the market trends upward.

Notably, Arthur Hayes, the founder of BitMEX Exchange, sold his Ethereum holdings to invest in "high beta DeFi assets," including ENA. Data from Lookonchain shows that Hayes acquired 1.22 million ENA, valued at $257.5K. This strategy was not unique to Hayes. During the downturn, the amount of ENA held outside exchanges increased, suggesting there was buying interest for those taking advantage of lower prices to enhance their ENA positions.

Ethena Source: Santiment

Conclusion

In summary, Ethena was significantly impacted by the October 10 crash, leading to $8 billion in USDe outflows and a 62% price drop in ENA. While USDe has struggled to regain its strength, there appears to be active buying of ENA at lower prices, suggesting that some investors are ready to capitalize on potential recovery opportunities moving forward.