Ethena - strong fundamentals amidst token unlocks
I want to begin this post with the statement that I think Ethena has among the strongest fundamentals in the market despite the large unlocks. Below, I will explain why I believe the unlocks will be dwarfed by future DAT flows and highlight a list of catalysts to look forward to.
Economics of the token:
The Unlock Overhang
It’s not a secret that the upcoming Ethena unlocks are a clear overhang on the token price. Below are the expected unlocks from today (26/08/2025) until the end of the year.
Airdrops are negligible & the foundation tokens are probably not sold in a traditional sense (if anything, they make their way into a DAT, which is constructive).
This leaves us with 724 million ENA valued at $456m(1 ENA = $0.63) from the team and investors. Roughly 11% of the current circulating supply (6.6 billion) or 4.8% of the total supply.
The Treasury Flywheel:
On July 21st, the Ethena Foundation announced the formation of StablecoinX and a $360 million private investment, from which $260 million was contributed in cash to buy back ENA from the open market. The remaining $100 million was contributed in-kind ($60 million from the Ethena Foundation and $40 million from other investors).
An often overlooked detail of the transaction is that StablecoinX received a 30% discount to ENA’s 30-day moving average price, bringing their purchase price to around $0.21 per ENA.
The result of the transaction:
- ◆300% increase for PIPE investors (purchase price to ATH)
- ◆60% increase for retail (who bought the announcement)
- ◆100% increase for insiders (who front-ran the announcement)
StablecoinX must have been one of the best trades this year, considering risk profile (open market buybacks & large discount), time-horizon (July - Q4 + cliff), and net profits.
Now, imagine for one second that you are one of the VCs that participated in the PIPE round or one of the VCs who missed the round. In both scenarios, there is a huge appetite to raise another round.
Looking at the raw numbers, thinking about the incentive from all stakeholders, and considering the overall positive outcome, I find it highly likely(probably even 80% probability) that theEthena Foundation will repeat this and raise another PIPE.
Assuming they raise another round, my best guess is
- ◆Bear-case: Smaller than the previous raise (10% probability)
- ◆Base-case: The same size as the previous raise (30% probability)
- ◆Bull-case: Larger than the previous raise (60% probability)
Considering these probabilities, Ethena’s token economics are way better than they look on first glance, and there is a decent chance that a good part, if not all, of the coming unlocks are going to be absorbed by the coming treasury company flows.
Catalysts to look forward to:
Interest rates and the probability of a cut:
It’s well discussed that FED funding rates are inversely correlated with crypto funding rates and, therefore, the revenue generation potential of Ethena.
The most recent example is a series of rate cuts in 2024.
The average crypto funding rate increased from 4.75% to 21% in the span of 6 months.
However, I have to point out that this is probably more of an extreme scenario rather than the average reaction to rate cuts, as the Trump election has also influenced risk appetite in the markets.
Currently, Trump has directly appointed 3 out of 7 Fed Governors(excluding Fed Chair Powell) and is trying to replace Lisa Cook, which would give him a majority in the FED board.
The current board, as well as Jerome Powell’s surprisingly dovish speech at Jackson Hole, presents a strong case for rate cuts in September, with a decent probability that Trump can get the majority on the Fed board.
StablecoinX listing and Circle catch-up trade:
One of the most interesting catalysts is the listing of StablecoinX on the Nasdaq, which is expected to happen in Q4 of this year. In stark contrast to many other treasury companies, I find it highly realistic that TradFi actually wants to buy StablecoinX and therefore Ethena.
The main arguments are:
- ◆Strong fundamentals (300% increase in USDE supply in the last 12 months),
- ◆Stablecoin narrative
- ◆Circle catch-up trade
Ethena is looking quite attractive if you compare the raw numbers to Circle at its ATH valuation. It’s a similar company, with similar revenue, but a way lower valuation. Currently at less than $10 billion fully diluted, versus Circle’s $66 billion at its all-time high.
Revenue increase and activating the fee switch
There is a lot of chatter around Ethena activating the fee switch, and in fact, the foundation presented a series of milestones, which, if achieved, enable the way for sharing revenue with Ethena holders.
Only 1 of these milestones is missing.
However, I think the fee switch will look a little bit different from what the market expects. Ethena has two distinct audiences: ENA holders and USDE holders.
Increasing the revenue for Ethena holders would cannibalize the yield of USDE.
In a recent interview (Good Alexander’s episode on yield & stablecoins), Guy mentioned that he prefers not to share revenue with Ethena holders as of now, but he also acknowledges the fact that the market disagrees with him.
I think this is one reason why Ethena started to incubate (Ethereal) as well as launch their own (HyENA) perpetual exchange. In my view, they will use the revenue generated from these products to cater to the demand for revenue share with the token holders while keeping enough revenue for the USDE yield.
Converge Blockchain:
Finally, I want to quickly talk about the Converge blockchain. I don’t have a nuanced opinion about Converge, but I still want to mention it to provide a full overview of upcoming catalysts and products.
Converge is being built by Ethena in collaboration with Securitize (the company that tokenized assets for BlackRock's BUIDL fund) to meet the blockchain demands of TradFi.
It’s EVM-compatible and will use USDE for gas fees.
You will find top DeFi applications on Converge, such as Pendle, Aave, and Ethereal.
Conclusion:
Ethena is a story of growth, especially recently, where we could observe the USDE supply skyrocket. The team is shipping fast (and a lot), which results in a handful of upcoming catalysts that make this trade interesting.
The only hurdle is the immense number of tokens that we have to account for. However, there is a high probability that at least some of these unlocks get neutralized by the DAT flows, and there is still a decent chance that all of the unlocks get taken out.
It’s this combination of high growth, strong fundamentals, and the market’s mispricing of the tokenomics that makes me bullish on Ethena.
Affiliate Disclosures
- •The author and/or others the author advises do not currently hold, or plan to initiate, an investment position in target.
- •The author does not hold an affiliated position with the target such as employment, directorship, or consultancy.
- •The author is not being compensated in any form by target in relation to this research.
- •To the best of the author's knowledge, the information provided here contains no material, non-public information. The accuracy of the information is the responsibility of the reader.