Embarking on the journey to compete with its centralized stablecoin counterparts, USDT and USDC, Ethena, a decentralized stablecoin, faces numerous challenges in its early stages. However, its development has gained significant momentum, leading many industry experts to have high expectations for its success.
Chapter 3: Team and Funding
3.1 Team
Ethena was founded by Guy Yang, drawing inspiration from Arthur Hayes’ blog post. The team consists of five core members.
– Guy Young is the founder and CEO of Ethena.
– Conor Ryder serves as the Research Director at Ethena Labs, previously working as a research analyst at Kaiko. He holds degrees from University College Dublin and Gonzaga College.
– Elliot Parker is the Product Management Director at Ethena Labs, with prior experience as a product manager at Paradigm. He graduated from the Australian National University.
– Seraphim Czecker is the Business Development Director at Ethena, previously serving as the risk manager at Euler Labs and an emerging market forex trader at Goldman Sachs.
– Zach Rosenberg is the General Counsel at Ethena Labs, having previously worked at PricewaterhouseCoopers. He holds degrees from Georgetown University, American University Washington College of Law, American University Kogod School of Business, and the University of Rochester.
3.2 Funding
In July 2023, Ethena secured $6.5 million in seed funding, with Dragonfly as the lead investor and participation from Deribit, Bybit, OKX Ventures, BitMEX, and others.
In February 2024, Ethena received $14 million in strategic investment led by Dragonfly, with participation from PayPal Ventures, Binance Labs, Deribit, Gemini Frontier Fund, Kraken Ventures, and more. This round of funding valued Ethena at $300 million.
Chapter 4: Token Economy
4.1 Token Allocation
Total Supply: 15 billion
Initial Circulating Supply: 1.425 billion
Foundation: 15% of tokens will be allocated towards further promoting the adoption of USDe, reducing the reliance on traditional banking systems and centralized stablecoins. These funds will be used for future development, risk assessment, auditing, and other aspects.
Investors: 25% (25% unlocked in the first year, followed by monthly linear unlocking)
Ecosystem Development: 30% of tokens will be used for the development of the Ethena ecosystem. Among these, 5% will be distributed as the first round of airdrops to users, while the remaining portion will support various Ethena plans and incentive activities. The token activity on Binance’s launchpool accounts for 2% of the total allocation.
Core Contributors: 30% of tokens will be allocated to Ethena Labs’ team and advisors, with a 25% unlock after one year.
Once the governance token of Ethena is launched, the “Q2 Activity” will be immediately initiated to further expand its token economic model. This activity will focus on the development of new products that support Bitcoin (BTC) as the underlying asset. This step not only enhances the growth potential of USDe but also brings broader market acceptance and application scenarios for Ethena.
Sats Rewards, as the core of the Q2 Activity, aims to reward users participating in the Ethena ecosystem construction. By increasing the rewards for early users, Ethena strengthens community engagement and encourages new users to join. This incentive mechanism demonstrates Ethena’s recognition of the importance of building a sustainable and active community.
Through a carefully designed token economic model and incentive mechanism, Ethena is committed to building an inclusive and sustainable DeFi platform, exploring new paths for the future of decentralized finance.
4.2 Token Unlocking
– June 2, 2024: 0.36% unlocked
– July 2, 2024: 0.36% unlocked
– August 2, 2024: 0.36% unlocked
– September 2, 2024: 0.36% unlocked
– October 2, 2024: 0.36% unlocked
– April 2, 2025: 13.75% unlocked (attention should be given to the high proportion)
Chapter 5: Target Valuation
Currently, ENA has a circulating market cap of $1.4 billion and a fully diluted valuation (FDV) market cap of $14 billion. The valuation of stablecoins is generally high, with on-chain settlement stablecoins alone surpassing $12 trillion in 2023. Once stablecoins gain market recognition, their value potential is immeasurable. AllianceBernstein, a globally leading asset management company with $7.25 trillion in assets under management (AUM), predicts that the stablecoin market could reach $28 trillion by 2028. This forecast indicates significant growth opportunities from the current $140 billion market cap (previously reached a peak of $187 billion).
As for the valuation of ENA, there is no definitive benchmark to refer to. Considering the immense market size and potential for growth in the stablecoin market, the focus should be on whether Ethena’s solution can address and adapt to the development needs of decentralized stablecoins in the web3 world, as well as mitigate potential risks.
Arthur Hayes, the co-founder of BitMEX, attempted to value ENA using a valuation model similar to Ondo. His model is based on allocating 80% of the protocol’s generated revenue to collateralized USDe (sUSDe) and 20% to the Ethena protocol. The formula is as follows:
Ethena protocol’s annual revenue = Total revenue * (1 – 80% * (1 – sUSDe supply / USDe supply))
If 100% of USDe is collateralized, i.e., sUSDe supply = USDe supply, then Ethena protocol’s annual revenue = Total revenue * 20%.
Total yield = USDe supply * (ETH staking yield + ETH Perp swap funding)
Assuming a staking yield (PA yield) of 4% for ETH and a PA of 20% for ETH Perp swap funding.
The key part of this model is the usage of the fully diluted valuation (FDV) using revenue multiples. By using these multiples as a guide, the potential FDV of Ethena is estimated.
In early March, Ethena’s $820 million assets generated a revenue yield of 67%. Assuming a supply ratio of sUSDe to USDe at 50%, the extrapolated annual revenue for Ethena after one year is approximately $300 million. Using a valuation similar to Ondo’s, the estimated FDV is $189 billion.
Therefore, the growth potential of ENA is calculated as 189/14, resulting in a price of 12.6.
Analyzing from market size and revenue structure, ENA has significant growth potential and deserves attention and investment. In terms of investment strategy, the following chapter will provide analysis and recommendations.
Chapter 6: ENA Investment Analysis and Recommendations
As ENA is a coin suitable for long-term investment, one approach is to buy now and hold for the long term. Another approach is to time the market, buying and selling at opportune moments, engaging in short-term trading while maintaining a long-term investment perspective. This chapter will focus on analyzing the latter investment approach and provide investment recommendations using chip distribution and MVRV research.
6.1 Chip Distribution Research
Based on Lin’s (Levi Lin, a prominent figure in the cryptocurrency field) ENA Dashboard’s URPD chip distribution chart, we can observe the following:
Starting from May 15th, the number of chips priced above 1 gradually decreased, while a significant chip consensus zone formed around 0.85, reaching its peak on May 22nd.
From May 22nd onwards, approximately one-third of the chips, especially those priced between 0.7 and 1.2, including the significant consensus zone near 0.85, disappeared. However, the consensus zone still remains focused around 0.85, forming a substantial support level. Building positions around this level would be advantageous.
Above 1, there is no significant concentration of chips, indicating smooth sailing. Once the bull market arrives, the resistance to upward movement will be minimal, resulting in rapid price increases.
6.2 MVRV Indicator Analysis
Next, let’s examine the MVRV (Market Value to Realized Value) Z-score indicator.
MVRV-Z Score = Circulating market cap / Realized market cap, where “Realized market cap” is based on the value of the coin transferred on-chain, calculated by summing up the “last moved value” of all on-chain transactions. Thus, when this indicator is too high, it suggests that the market cap is relatively overvalued compared to the actual value, which may hinder further price increases. Conversely, a low score indicates undervaluation. Based on historical experience, when this indicator reaches historical highs, it suggests an increased probability of downward price trends. Therefore, caution should be exercised when chasing higher prices. When this indicator is below 1, it means the average holding cost across the network is in a loss position, making it more advantageous to build positions in this range compared to other holders.
When this indicator is above 3, it suggests the average profit across the network is more than triple, entering a risk zone, and it may be advisable to consider taking profits in stages.
Regarding ENA’s MVRV indicator, the chart shows that since April 14th, ENA’s MVRV has been concentrated around 1, reaching a low of 0.71. Currently, the Z-score is 1, indicating a suitable time for phased investment and building positions.
Therefore, the current range is suitable for building positions, and it would be even better to enter around 0.85 or lower.
Chapter 7: Market Heat
The market’s attention and interest in ENA have been highly positive. The following three images demonstrate this:
Despite the price correction due to the overall market downturn, the market and key opinion leaders (KOLs) have maintained a positive interest in ENA. Compared to April, there has been a noticeable increase in KOLs’ attention to ENA in May, indicating its technical advantages and future development prospects.
Chapter 8: Conclusion
ENA (Ethena) makes it possible for the web3 world to have independent issuance and pricing rights for stablecoins. It has tremendous growth potential and room for imagination. Based on Levi Lin’s chip distribution and MVRV on-chain data, it is currently a good time to build positions through phased investment, with low risks.
ENA (Ethena) is currently one of the most promising decentralized stablecoin projects. It is hoped that the Ethena team will continue to update and iterate, leveraging appropriate technologies and methods to mitigate potential risks.
