Analyzing Ethena from a business perspective: After a big dump, is the Rebound of ENA worth buying?

Ethena, as a prominent DeFi project in this cycle, saw its token's circulating market cap exceed $2 billion shortly after its launch. However, after entering April, the token price rapidly fell, with the circulating market cap retracting by more than 80% at its peak. Since September, Ethena has accelerated its collaboration with various projects, expanding the use cases for USDE, and the scale of the stablecoin has begun to recover, with the circulating market cap rebounding from a low of $400 million in September to around $1 billion currently.

This article will focus on the following three aspects:

1. Ethena's current core business metrics, including scale, revenue, costs, and actual profit levels.
2. The future development direction of Ethena is worth looking forward to.
3. Is the current price of ENA undervalued?

1. Current Core Business Situation of Ethena

1.1 The business model of Ethena

Ethena is positioned as a synthetic dollar project with "native yield", belonging to the same track as MakerDAO, Frax, and others. Its business model mainly includes:

1. Issue the stablecoin USDE, expand the balance sheet size.
2. Use the raised funds for financial operations to generate profits.

When the returns on operating funds exceed the financing and operating costs, the project can be profitable.

1.2 The 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 at the beginning of July, and has rebounded to 2.72 billion by the end of October. 64% of it is in a staked state, and the current APY is 13%.

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

Bybit, as an important partner platform, currently holds 263 million USDE.

1.2.2 Protocol Revenue and Underlying Asset Distribution

The main sources of income for Ethena are:

1. ETH Staking Rewards
2. Derivatives Hedging Arbitrage Income
3. Stablecoin financial management returns

In October, the agreement revenue was 10.63 million USD, a month-on-month increase of 84.5%.

Currently, 52% of Ethena's underlying assets are BTC arbitrage positions, 21% are ETH arbitrage positions, 11% are ETH staking assets, and 16% are stablecoins.

The annualized yield for BTC and ETH perpetual contract arbitrage is currently above 8%.

1.2.3 Ethena's protocol expenses and profit levels

Ethena's expenses are divided into:

1. Financial expenditure: payment to USDE stakers
2. Marketing Expenses: Incentivizing users to participate in various activities through ENA tokens.

As of the end of October, Ethena's total expenditure this year is approximately:

• Financial expenditure: 81.647 million USD
• Marketing expenses: $910 million ( expenses after September not included )

The total revenue for the same period was 124 million USD.

The net loss is approximately $868 million (, not considering the ENA expenses for September and October ).

2. The promising future development of Ethena

In the coming months, the expected developments of Ethena include:

• The rebound in the crypto market has led to an increase in arbitrage profits.
• Incorporate SOL into underlying assets
• More projects are emerging within the Ethena ecosystem, increasing ENA airdrop profits.
• Ethena self-operated public chain launched

The most important thing for Ethena is that USDE can be accepted as collateral and trading assets by more top exchanges.

3. Current Valuation Analysis of ENA

3.1 Qualitative Analysis

Positive factors:

• The rebound in the crypto market is beneficial for the rise in arbitrage profits.
• SOL included as a base asset attracts more attention
• The increase in ecological projects brings airdrops
• The project party has the motivation to pump the coin price before a large-scale unlocking.

Adverse factors:

• ENA lacks actual profit distribution
• The project has suffered significant losses
• Facing 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

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) 3.2 Quantitative Comparison

Compared to MakerDAO, Ethena currently does not have a significant advantage in terms of protocol revenue and profit.

![Business Analysis of Ethena: big dump of 80% followed by Rebound, is ENA worth buying?]###https://img-cdn.gateio.im/webp-social/moments-54d10b54525b04fe61dd7610b69d2b95.webp(

![Business Analysis of Ethena: 80% big dump followed by Rebound, is ENA worth buying?])https://img-cdn.gateio.im/webp-social/moments-618ec302987479d09272094b5eb03ce7.webp(

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Summary

Ethena's core business model is similar to that of other stablecoin projects and is currently still in a stage of significant losses. Its valuation is not underestimated compared to MakerDAO.

Ethena has demonstrated strong business development capabilities, but it still needs time to verify the stability and long-term viability of its product architecture. Investors should assess risks cautiously.