Ethena Labs Onboards Bitcoin as a Backing Asset for the Crypto Project’s Synthetic Dollar

Synthetic dollar protocol developer Ethena Labs has added Bitcoin (BTC) to the backing of its USDe stablecoin, the firm’s flagship product.

Announcing via the social media platform X, Ethena Labs says that using Bitcoin to back USDe is “a crucial unlock which will enable USDe to scale significantly” from its current supply of $2 billion.

USDe aims to be a censorship-resistant stablecoin that maintains its backing on-chain via delta-hedging staked Ethereum (ETH) collateral – a mechanism described as an “Internet Bond.”

“The ‘Internet Bond’ will combine yield derived from staked Ethereum as well as the funding and basis spread from perpetual and futures’ markets, to create the first on-chain crypto-native ‘bond’ that can function as a dollar-denominated savings instrument for users in permitted jurisdictions.”

Ethena Labs says that Bitcoin’s thicker liquidity and higher open interest on exchanges make it ideal for backing and scaling USDe compared to Ethereum.

“In just one year, BTC open interest (OI) on major exchanges (excluding the Chicago Mercantile Exchange) has grown from $10 billion to $25 billion, while ETH OI has grown from $5 to $10 billion.

BTC derivative markets are growing at a faster pace than ETH and offer better scalability and liquidity for delta hedging…

While BTC does not possess a native staking yield like staked ETH, staking yields of 3-4% are less significant in a bull market when funding rates are >30%.

The current environment is ideal for optimizing for the scalability of USDe.”

Ethena’s BTC backing for USDe is now reflected live on its dashboard.

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