Ethena USDe Loses 24% Market Cap While Stablecoin Rivals Grow

TLDR

Table of Contents

USDe supply dropped by 24% in November, losing $2.2 billion in market cap.
USDe fell from third to fourth place in stablecoin rankings by the end of November.
PYUSD saw 35% growth in November, reaching $3.8 billion in market cap.
Tether’s USDT added $1.3 billion and USDC added $600 million during the month.

Ethena’s synthetic stablecoin USDe, once among the top three in the market, saw a sharp 24% supply drop in November, falling from $9.3 billion to $7.1 billion. This contraction followed a brief depegging event on Binance. Meanwhile, traditional fiat-backed stablecoins like USDT, USDC, and PYUSD recorded billions in growth, signaling a shift in investor confidence toward more established dollar-backed digital assets.

USDe Supply Falls After Depegging Incident

Ethena’s synthetic stablecoin, USDe, recorded a 24% drop in supply during November, falling from $9.3 billion to $7.1 billion. According to CoinGecko, this marks a $2.2 billion reduction in just one month. This contraction followed a depegging event on Binance, where USDe briefly dropped to $0.65.

Founder Guy Young attributed the price disruption to a Binance oracle issue and not to flaws in the USDe collateral mechanism. He stated that the token’s mint and redemption system remained functional throughout. During the incident, around two billion USDe were redeemed on decentralized platforms.

Synthetic Design Poses Unique Challenges

Unlike traditional fiat-backed stablecoins, USDe is not backed by direct cash reserves. It maintains its value using a trading strategy involving delta-hedged Ethereum positions and perpetual futures markets. This synthetic model enables USDe to generate yields and adjust supply based on trading conditions.

However, this approach also exposes USDe to market risks such as liquidity shortages and extreme funding rates. If futures markets become unstable or shallow, the hedge may fail to maintain the token’s dollar peg.

Market Ranking Drops as Competitors Grow

At its peak in early October, USDe had a market cap of $14.8 billion, making it the third-largest stablecoin. But as of December 1, its market cap stands at $6.9 billion, according to CoinGecko. This puts it in fourth place behind USDT, USDC, and PYUSD.

In contrast, dollar-backed stablecoins posted steady growth during November. Tether’s USDT rose by $1.3 billion to reach $184.6 billion. Circle’s USDC added $600 million, increasing its supply to $76.5 billion.

PayPal’s PYUSD experienced the most growth, expanding from $2.8 billion to $3.8 billion. This 35% increase followed months of rapid adoption, as it jumped from just $1.2 billion in September. Ripple’s RLUSD also grew from $960 million to $1.26 billion, reaching over $1 billion for the first time.

Liquidity and Market Confidence Drive Stablecoin Trends

The wider stablecoin market remains dominated by dollar-pegged tokens, with $303 billion of the $311 billion total coming from fiat-backed assets. As of the latest data, USDe’s contraction shows users are either exiting DeFi pools or selling USDe for other stable assets.

Ethena’s model, though tested under various market conditions, depends heavily on futures markets remaining liquid and efficient. The sharp drop in supply suggests cautious investor sentiment, especially after the Binance depeg incident.

Even as USDe expands into new trading pairs, such as the HYPE/USDE pair on Hyperliquid’s spot market, the broader market trend favors stablecoins with direct dollar reserves. Investors appear to prefer tokens with predictable behavior, particularly during volatile periods.