Original | Odaily ([@OdailyChina](https://x.com/OdailyChina))
Author | Azuma ([@azuma_eth](https://x.com/azuma_eth))
ETH is finally getting tough!
As the "Altcoin leader" ETH continues to surge, the Altcoin market shows signs of recovery, with mainstream Ethereum ecosystem projects like Ethena (ENA), Lido (LDO), Curve (CRV), and Frax (FRAX) showing even stronger trends. Among them, ENA briefly broke through $0.5, with a nearly 50% increase in a week (this is based on a previous rally after listing on Upbit), standing out particularly among so-called "ETH betas".
Based on comprehensive analysis from various sources, we believe the reasons for ENA's strong rise can be attributed to the following four factors.
Reason One: ETH's Spillover Effect
First, the majority of Ethena's business is still focused on the Ethereum ecosystem (with a small portion of USDe flowing to ecosystems like Solana through cross-chain methods), and Ethena is one of the few star projects that emerged from the Ethereum ecosystem in recent years, so calling it an "Ethereum direct descendant" is not an overstatement.
Similar to LDO, CRV, and other tokens mentioned earlier, ETH's rise will inevitably boost such mainstream ecosystem projects, which is an essential prerequisite.
However, this does not fully explain why ENA has been leading "Ethereum concept tokens" recently. The true reasons are the following three points.
Reason Two: Business Model Returns to Positive Flywheel
To understand this reason, one must first understand Ethena's business model.
In short, Ethena is an interest-bearing stablecoin project focused on "spot-futures arbitrage", with its stablecoin USDe being collateralized by an equal amount of spot long positions and futures short positions. Its income primarily comes from "spot long position staking returns" and "futures short position funding rate returns", where the first income source does not fluctuate much, and the second is key to the protocol's business operation.
The futures funding rate depends on the market's long-short game, which inherently has significant uncertainty. Although in the long term, positive funding rates will dominate (meaning futures short positions generally receive positive rate returns), during periods of pessimistic market sentiment, rates can continuously decline or even become negative - severely impacting Ethena's protocol income capacity and potentially causing short-term losses.
Odaily Note: For basic concepts about Ethena and rate fluctuation impacts, refer to《Analyzing Ethena Labs: Valued at $300 Million, the Stablecoin Disruptor in Arthur Hayes' Eyes》and《After the Crash, How is Ethena (USDe) Performing Under Negative Rates?》
For a considerable period, due to overall market pessimism, contract market rates remained low, resulting in Ethena's protocol income and sUSDe yield being less than ideal.
However, with the recent market recovery (especially ETH's price rise, as ETH is Ethena's primary arbitrage target), contract rates have been continuously climbing - Ethena's page shows the current protocol's average annualized rate is around 16%.
Rate market yields directly impact sUSDe's yield. In the past two weeks, sUSDe's average yield has increased from around 5.59% to 9.74%, directly attracting more capital inflow - on-chain data shows USDe's issuance has grown to approximately $6.1 billion, a historical high.
In short, this is a positive flywheel: Market recovery ➡️ Long sentiment rises ➡️ Rate income grows ➡️ Stablecoin yield increases ➡️ More capital inflow ➡️ Stablecoin issuance grows ➡️ Protocol fundamentals improve ➡️ Token price gets stronger support...
The following chart more intuitively presents this logic, showing a clear synchronization between ENA's price fluctuations and ETH's contract scale.
Reason Three: Stablecoin Bill Passage, Sector-wide Positive
Another major positive for Ethena is the stablecoin bill's passage.
On July 19th at dawn Beijing time, President Trump officially signed the GENIUS Act at the White House East Room, meaning the bill focusing on stablecoin industry development has completed all legislative processes and become a law awaiting implementation.
Odaily Note: See 《Historic Moment: Trump Officially Signs GENIUS Act》.
Although USDe's collateral structure might not meet the GENIUS Act's requirement that "stablecoins must be 100% backed by US dollars or other highly liquid assets", Ethena has long been prepared - late last year, Ethena launched a new stablecoin product USDtb supported by BlackRock's BUIDL, which will use cash or cash equivalents to support at a 1:1 ratio. As of this writing, USDtb's issuance has grown to $1.46 billion.
Simply put, Ethena is now walking on two legs: USDe targets the crypto-native market, while USDtb targets the compliant institutional market.
Reason Four: ENA's "Fee Switch" Expectation
The potential activation of the "fee switch" is another reason for ENA's recent rise. The "fee switch" is a common term in DeFi protocols, referring to whether protocol income will be distributed to the protocol's native token (in this case, ENA). If this switch can be turned on, it will directly boost ENA's value capture ability.
In a previous community vote, Ethena clearly defined five conditions for activating the "fee switch":
✅USDe Circulation: Requires over $6 billion, currently at $6.1 billion, already met.
✅Cumulative Protocol Income: Requires over $250 million, currently at $431.31 million, already met.
❌Exchange Adoption: Requires listing on 4 out of top 5 derivatives exchanges, currently at 3, not met.
✅Reserve Fund: Requires over 1% of USDe supply, already met.
❌sUSDe Yield Spread with Benchmark Rate: Requires 5.0-7.5% spread, currently 3.03% with Aave USDC, 2.48% with US Treasury, 2.05% with sUSD, not met.
As seen, three of five requirements are already met. Considering the recent trend of rising rates, sUSDe's yield is also increasing, which will help meet the fifth condition. Only one more exchange needs to be integrated for the third requirement.
It seems the "fee switch" activation is not far away, and the market might choose to bet on this in advance.
Will ENA Be ETH's Biggest Beta?
Besides the above reasons, another notable point is that BitMEX founder Arthur Hayes, who previously "milked and dumped" ENA when it was above $1, seems to be quietly rebuilding his position. On-chain analyst Yu Jin detected that Arthur purchased $1.505 million worth of ENA through multiple channels in one day last week.
What Arthur says can't be fully trusted, but what he does is still worth referencing...
Odaily Note: You can refer to the article "Be Careful When Arthur Hayes Suddenly Endorses the Coin You Bought".
Considering the above reasons, it can be anticipated that ENA's fundamental growth trend and value capture expectations will continue in the near future, which may support its current price movement. At a time when ETH is gaining momentum, ENA might be a potential Beta option.
