Business Analysis of Ethena: Rebound after big dump, is ENA worth buying?

Ethena is one of the more noteworthy DeFi projects in this cycle, with its token's circulating market value once exceeding $2 billion after its launch. However, since April of this year, its token price has rapidly fallen, with the circulating market value retracting by more than 80% at most, and the token price retracting by up to 87%.

Since September, Ethena has accelerated its collaboration with various projects, expanding the use cases for USDE. The scale of stablecoins has also started to bottom out and rebound, with the circulating market value rebounding from a low of 400 million USD in September to around 1 billion USD now.

This article will focus on the following three issues:

1. Current business level: Ethena's current core business metrics, including scale, revenue, overall costs, and actual profit levels.
2. Future Business Outlook: The promising narrative and future development of Ethena.
3. Valuation level: Is the current price of ENA in the undervalued range?

1. Business Level: Ethena's current core business situation

1.1 Ethena's Business Model

Ethena positions itself as a synthetic dollar project with "native yield," belonging to the same track as MakerDAO, Frax, crvUSD, etc. — stablecoins.

The business models of current cryptocurrency stablecoin projects are basically similar:

1. Raise funds, issue debt ( stablecoins ), expand the project's balance sheet.
2. Use the raised funds for financial operations to obtain financial returns.

A project is profitable when the income generated from its operating funds exceeds the total costs incurred in raising funds and running the project.

Ethena, as a latecomer stablecoin project, is at a disadvantage in terms of network effects and brand credibility, which is specifically reflected in its higher fundraising costs. Ethena raises funds by offering users incentives in the project's token ENA and stablecoin yields.

1.2 Core Business Data of Ethena

1.2.1 USDE Issuance Scale and Distribution

The issuance scale of USDE continued to decline after reaching a new high of 3.61 billion in early July 2024, hitting a low of 2.41 billion in mid-October. It is currently gradually rebounding, standing at approximately 2.72 billion as of October 31.

64% of USDE is currently staked, with an APY of 13%.

USDE is not only issued on the Ethereum mainnet, but also expanded on multiple L2 and L1 networks. Currently, the scale of USDE issued on other chains is 226 million, accounting for approximately 8.3% of the total.

Bybit, as an investor and important partner of Ethena, is one of the largest custodians of USDE, currently holding 263 million USDE.

1.2.2 Protocol Revenue and Underlying Asset Distribution

Ethena's current protocol revenue sources are three:

1. The earnings from ETH staked in underlying assets
2. Funding rates and basis income generated from derivatives hedging arbitrage
3. Investment Income: Hold in the form of stablecoins to earn deposit interest or incentive subsidies

According to Token Terminal data, Ethena's protocol revenue in October was $10.63 million, a month-on-month increase of 84.5%.

From the perspective of Ethena's underlying assets, 52% is BTC arbitrage positions, 21% is ETH arbitrage positions, 11% is ETH staking asset arbitrage positions, and the remaining 16% is stablecoins.

The average annualized return on arbitrage for BTC and ETH perpetual contracts is currently over 8%.

1.2.3 Ethena's protocol expenditure and profit level

The protocol expenses of Ethena are divided into two categories:

1. Financial expenses: Paid to USDE stakers through USDE.
2. Marketing expenses: Paid to users participating in various growth activities of Ethena through ENA tokens.

As of the end of October, the rough statistics for Ethena this year are as follows:

• Financial expenditure: 81.647 million USD
• Marketing expenses: approximately $910 million
• Total revenue: $124 million

In other words, Ethena's net loss has reached 868 million USD by the end of October this year.

2. Future Business Outlook: The narrative and future development of Ethena are worth looking forward to.

The following directions for Ethena are worth looking forward to in the coming months to a year:

• The warming crypto market is conducive to the increase in perpetual arbitrage yield and scale, boosting Ethena's protocol revenue.
• The Ethena ecosystem may see more projects, increasing ENA airdrop income.
• The Ethena self-operated public chain is launched, which can bring attention and nominal scenarios such as staking to ENA.

However, the most important thing for Ethena is that USDE can be accepted as collateral and trading assets by more major exchanges.

3. Valuation Level: Is the current price of ENA in the undervalued range?

3.1 Qualitative Analysis

Factors favorable to the price of ENA token:

• The rebound in the crypto market has led to an increase in arbitrage profits.
• Incorporate SOL as a underlying asset to attract attention from the SOL ecosystem
• More projects may emerge in the Ethena ecosystem
• The project party has the motivation to pump the coin price.

Adverse factors:

• ENA lacks substantive profit distribution
• The Ethena project has suffered significant losses.
• ENA faces significant inflation pressure in the next six months.

![Business Analysis of Ethena: big dump of 80% followed by Rebound, is ENA worth buying?](https://img-cdn.gateio.im/webp-social/moments-054ec322d0350c0bc4100eefb1001759.webp01

)# 3.2 Quantitative Comparison

Compared to MakerDAO, Ethena's ENA does not currently have a significant cost-performance ratio in terms of protocol revenue or profit.

![Business Analysis of Ethena: big dump of 80% followed by Rebound, is ENA worth buying?]###https://img-cdn.gateio.im/webp-social/moments-96b749f372265c3753b0555875de4981.webp(

) Summary

Ethena is currently still in a phase of massive losses, and its valuation is not low compared to MakerDAO. However, Ethena has demonstrated strong business development capabilities, which may drive a positive cycle of price increases and business scale expansion.

However, as products with a significant Lindy effect, Ethena and USDE still need more time to verify the stability of their product architecture and their survival capability after the subsidy decline.

![Business Analysis of Ethena: big dump of 80% followed by Rebound, is ENA worth buying?]###https://img-cdn.gateio.im/webp-social/moments-9294e3fb58e11a0ce3951eb71ef8d733.webp(