The team behind USDe, Ethena Labs, has included Bitcoin (BTC) as a form of collateral for their synthetic dollar-pegged product, aiming to expand the current $2 billion supply significantly. The addition of Bitcoin to USDe's backing assets is considered a crucial development that will allow for substantial scaling from its current supply.

Ethena Labs explained in an announcement on April 4 that with Bitcoin's open interest rising from $10 billion to $25 billion in the past year on major cryptocurrency platforms, USDe has the potential to increase its scale by 2.5 times.

The launch of USDe on the Ethereum network occurred on February 19, offering a promised annual percentage yield (APY) of 27.6% on staked USDe tokens. However, concerns arose in the community as the APY reached a peak of 113% on March 5 before dropping to 7.15%.

Ethena Labs emphasized that Bitcoin would enhance liquidity and provide a safer and more robust product for USDe token holders. The firm highlighted that BTC derivative markets are expanding at a quicker rate than ETH derivatives, offering better scalability and liquidity for delta hedging – a strategy adopted by Ethena to uphold USDe's peg.

To minimize the impact of downward volatility on USDe's collateral, Ethena may hold short positions in Ether or Ether-based derivatives, which prove beneficial when Ether's price decreases.

Before the integration of Bitcoin, USDe was backed by ETH, Tether (USDT), and Ether-based liquid staking tokens in ratios of 45%, 38%, and 17%, respectively. Ethena procures the majority of its collateral from Binance, Bybit, and OKX in proportions of 59%, 15%, and 20%, with Deribit, Bitget, and BitMEX making up the remaining 6%.

Although Bitcoin lacks a native staking yield like staked Ether, Ethena noted that staking yields of 3%-4% are deemed less significant during bull markets when funding rates could surpass 30%.

Ethena's goal is to set USDe apart from stablecoins by reducing reliance on the traditional banking system. USDe currently ranks fifth in terms of market capitalization among USD-denominated products, trailing behind USDT, USDC, DAI, and FDUSD.

The information provided does not constitute trading advice. Independent research or consultation with a professional is recommended before making any investment decisions.