Massive Capital Outflow
Ethena's stablecoin USDe has seen its circulating supply drop sharply from 14.8 billion tokens in early October to approximately 8.395 billion, a reduction of $6.5 billion. This significant decline has sparked widespread market concern.

Security Concerns and Transparency
Despite recent turmoil involving stablecoin projects with similar strategies, Ethena maintains relatively transparent reserve disclosures and position reporting. Its primary hedging assets—BTC, ETH, and SOL—have exhibited manageable volatility, reducing the risk of Auto-Deleveraging (ADL) events.

Primary Reasons for Capital Outflow
The cooling market sentiment has compressed arbitrage opportunities, causing USDe's yield to fall to 4.64%, a level comparable to mainstream lending rates. Additionally, growing awareness of risks associated with recursive lending has prompted capital to shift toward alternative yield-generating avenues.

Scalability Challenges
Ethena's delta-neutral strategy, which relies on perpetual futures markets, is constrained by exchange position limits and liquidity. This model struggles to compete with fiat-backed stablecoins like USDT and may remain a niche financial product in the long term.

Ethena Experiences Largest Capital Outflow Since Inception
On-chain data reveals that the circulating supply of Ethena’s flagship stablecoin, USDe, has decreased to 8.395 billion tokens, down from nearly 14.8 billion in early October. While not a "halving," the scale of this withdrawal is striking.

Is USDe Still Safe?
Recent DeFi security incidents, particularly the collapse of two yield-generating stablecoins—Stream Finance (xUSD) and Stable Labs (USDX)—that employed delta-neutral strategies similar to Ethena’s, have fueled fear, uncertainty, and doubt (FUD) around the project. Rumors suggest their neutral balances were disrupted by ADL during the October 11 market crash. Combined with USDe’s brief depeg on Binance, these events have intensified scrutiny.

Given Ethena’s market size, a potential failure could trigger a black swan event comparable to the Terra collapse. So, is Ethena truly at risk? Is the capital outflow driven by safety concerns? Can users confidently deploy funds into USDe and its derivative strategies?

Personally, I believe Ethena’s strategy remains operational. While DeFi risk aversion has contributed to outflows, it is not the primary cause. USDe’s security remains relatively stable, though avoiding recursive lending is advisable.

Why Ethena’s Operations Are Deemed Secure
Two key factors support this view. First, unlike many yield-bearing stablecoins that lack clear disclosures on position structure, leverage, hedging exchanges, or liquidation parameters, Ethena sets an industry standard for transparency. Users can easily access reserve proofs, position distributions, and real-time yield data on its official website.

Second, regarding ADL disrupting neutral strategies, while rumors suggest Ethena has ADL exemption agreements with certain exchanges, this remains unconfirmed. Nevertheless, Ethena is less vulnerable to ADL due to its primary use of BTC, ETH, and SOL as hedging assets. These assets experienced relatively lower volatility during the October 11 crash and have stronger counterparty capacity. ADL is more common in altcoin markets with higher volatility and weaker liquidity, which explains why less transparent protocols (often employing overly aggressive or non-neutral strategies) have faced issues.

Main Drivers of Capital Outflow
Two factors explain the exodus. First, as market sentiment cooled—especially after October 11—basis arbitrage opportunities in futures and spot markets narrowed. This reduced protocol yields and sUSDe’s annualized rate (now 4.64%), eliminating its advantage over rates on platforms like Aave and Spark. Consequently, funds migrated to other yield options.

Second, USDe’s price volatility on Binance heightened market awareness of recursive lending risks. Coupled with declining yields both on-chain and off-chain (due to reduced CEX subsidies), large-scale unwinding of recursive positions triggered withdrawals.

Based on this analysis, Ethena and USDe continue to operate stably. While extreme market conditions and security incidents exacerbated outflows, the primary cause remains diminished attractiveness due to compressed arbitrage opportunities—an inherent feature of Ethena’s design, where yields fluctuate with market dynamics.

A More Critical Challenge: Scalability
Beyond temporary capital outflows, Ethena faces a more fundamental issue: the scalability limits of its delta-neutral model, which depends on perpetual futures markets.

On November 6, DeFi expert Mindao commented on the recent collapse of neutral strategy stablecoins, stating, "Long-term returns of such strategies will converge to Treasury bond levels (or even lower). Liquidity is constrained by exchange open interest, and counterparty risks lie entirely within black-box CEXs. This model is fundamentally flawed... It cannot scale and will ultimately remain a niche financial product, unable to compete with fiat-backed stablecoins."

This resembles The Truman Show: Ethena thrives in a confined ecosystem bounded by perpetual market position sizes, exchange liquidity, and infrastructure limitations. In contrast, competitors like USDT and USDC operate in an unrestricted broader environment. This inherent structural constraint may be Ethena’s greatest challenge.

Massive Capital Outflow
Ethena's stablecoin USDe has seen its circulating supply drop sharply from 14.8 billion tokens in early October to approximately 8.395 billion, a reduction of $6.5 billion. This significant decline has sparked widespread market concern.

Security Concerns and Transparency
Despite recent turmoil involving stablecoin projects with similar strategies, Ethena maintains relatively transparent reserve disclosures and position reporting. Its primary hedging assets—BTC, ETH, and SOL—have exhibited manageable volatility, reducing the risk of Auto-Deleveraging (ADL) events.

Primary Reasons for Capital Outflow
The cooling market sentiment has compressed arbitrage opportunities, causing USDe's yield to fall to 4.64%, a level comparable to mainstream lending rates. Additionally, growing awareness of risks associated with recursive lending has prompted capital to shift toward alternative yield-generating avenues.

Scalability Challenges
Ethena's delta-neutral strategy, which relies on perpetual futures markets, is constrained by exchange position limits and liquidity. This model struggles to compete with fiat-backed stablecoins like USDT and may remain a niche financial product in the long term.

Ethena Experiences Largest Capital Outflow Since Inception
On-chain data reveals that the circulating supply of Ethena’s flagship stablecoin, USDe, has decreased to 8.395 billion tokens, down from nearly 14.8 billion in early October. While not a "halving," the scale of this withdrawal is striking.

Is USDe Still Safe?
Recent DeFi security incidents, particularly the collapse of two yield-generating stablecoins—Stream Finance (xUSD) and Stable Labs (USDX)—that employed delta-neutral strategies similar to Ethena’s, have fueled fear, uncertainty, and doubt (FUD) around the project. Rumors suggest their neutral balances were disrupted by ADL during the October 11 market crash. Combined with USDe’s brief depeg on Binance, these events have intensified scrutiny.

Given Ethena’s market size, a potential failure could trigger a black swan event comparable to the Terra collapse. So, is Ethena truly at risk? Is the capital outflow driven by safety concerns? Can users confidently deploy funds into USDe and its derivative strategies?

Personally, I believe Ethena’s strategy remains operational. While DeFi risk aversion has contributed to outflows, it is not the primary cause. USDe’s security remains relatively stable, though avoiding recursive lending is advisable.

Why Ethena’s Operations Are Deemed Secure
Two key factors support this view. First, unlike many yield-bearing stablecoins that lack clear disclosures on position structure, leverage, hedging exchanges, or liquidation parameters, Ethena sets an industry standard for transparency. Users can easily access reserve proofs, position distributions, and real-time yield data on its official website.

Second, regarding ADL disrupting neutral strategies, while rumors suggest Ethena has ADL exemption agreements with certain exchanges, this remains unconfirmed. Nevertheless, Ethena is less vulnerable to ADL due to its primary use of BTC, ETH, and SOL as hedging assets. These assets experienced relatively lower volatility during the October 11 crash and have stronger counterparty capacity. ADL is more common in altcoin markets with higher volatility and weaker liquidity, which explains why less transparent protocols (often employing overly aggressive or non-neutral strategies) have faced issues.

Main Drivers of Capital Outflow
Two factors explain the exodus. First, as market sentiment cooled—especially after October 11—basis arbitrage opportunities in futures and spot markets narrowed. This reduced protocol yields and sUSDe’s annualized rate (now 4.64%), eliminating its advantage over rates on platforms like Aave and Spark. Consequently, funds migrated to other yield options.

Second, USDe’s price volatility on Binance heightened market awareness of recursive lending risks. Coupled with declining yields both on-chain and off-chain (due to reduced CEX subsidies), large-scale unwinding of recursive positions triggered withdrawals.

Based on this analysis, Ethena and USDe continue to operate stably. While extreme market conditions and security incidents exacerbated outflows, the primary cause remains diminished attractiveness due to compressed arbitrage opportunities—an inherent feature of Ethena’s design, where yields fluctuate with market dynamics.

A More Critical Challenge: Scalability
Beyond temporary capital outflows, Ethena faces a more fundamental issue: the scalability limits of its delta-neutral model, which depends on perpetual futures markets.

On November 6, DeFi expert Mindao commented on the recent collapse of neutral strategy stablecoins, stating, "Long-term returns of such strategies will converge to Treasury bond levels (or even lower). Liquidity is constrained by exchange open interest, and counterparty risks lie entirely within black-box CEXs. This model is fundamentally flawed... It cannot scale and will ultimately remain a niche financial product, unable to compete with fiat-backed stablecoins."

This resembles The Truman Show: Ethena thrives in a confined ecosystem bounded by perpetual market position sizes, exchange liquidity, and infrastructure limitations. In contrast, competitors like USDT and USDC operate in an unrestricted broader environment. This inherent structural constraint may be Ethena’s greatest challenge.