Athena Labs Adds Bitcoin Support to Synthetic Dollar Page USDe

Athena Labs, creators of the USD, included Bitcoin (BTC) as a synthetic dollar offering.

This move aims to increase the supply of US dollars from the current level of 2 billion dollars.

BTC to increase scale and liquidity

In an announcement on April 4, X highlighted the strategic importance of including BTC as a support asset.

We are excited to announce that Athena has introduced BTC as a support asset for USD

This is a critical opening that allows the USDe to scale significantly beyond its current $2 billion supply pic.twitter.com/FOZRWBrVZV

— Athena Labs (@ethena_labs) April 4, 2024

Athena Labs emphasized BTC's role in boosting USDe's expansion, citing the open interest of major exchanges. In the past year, the open interest of BTC increased from 10 billion dollars to 25 billion dollars, which is more than the growth of Ethereum (ETH) derivatives.

BTC also offers a better liquidity and duration profile and liquid staking tokens

When ethane is close to 10 billion dollars, this will provide stronger support and ultimately a safer product for consumers

— Athena Labs (@ethena_labs) April 4, 2024

The team recognized BTC's superior liquidity and scalability for Delta Hedge, providing a safer environment for USDe users. Historical data also shows BTC's resilience during bear markets, outperforming ETH in currency allocation products.

Athena acknowledges that BTC does not have a natural equity yield comparable to that of Ether. However, the group noted that stockpiles of 3-4 percent of stocks have a relatively small impact on labor market conditions, while funding rates can exceed 30 percent.

Athena uses a delta hedging mechanism in the data market to maintain USDE's grip. This involves holding short positions in derivatives linked to Ether or ETH, which can profit if the asset's price declines. As a result, Athena can offset much of the downside volatility in the USD portfolio.

History of the USDe

USDe was launched on the Ethereum blockchain on February 19, with USDe initially offering a 27.6% annual percentage yield (APY) on a share of USDe.

Despite a 113% API high on March 5, the yield fell to 7.15%. Before the BTC merger, USDe was primarily supported by ETH, Tether (USDT), and Ether-based liquid staking tokens at 45%, 38%, and 17% respectively.

Most of the collateral comes from Binance, ByBit, and OKX, comprising 59%, 15%, and 20%, respectively, with the remaining 6% coming from DeriBit, BitGate, and BitMex.

According to CoinGecko, USDe ranks fifth by market capitalization among US dollar-backed commodities, USDT, USD Coin (USDC), Dai (DAI), and First Digital USD (FUSD).

With the BTC integration, Etena Labs aims to strengthen USD support and ultimately provide its users with a safe and secure product. The move aligns with the company's vision for the second season of the SAT campaign, which is focused on expanding BTC integration.

Starting April 5, users will have access to transparency of BTC support positions through the Athena dashboard.