USDe Suffers Significant Monthly Contraction
Ethena’s synthetic-dollar stablecoin, USDe, experienced one of its most significant monthly declines in November. CoinGecko data reveals that USDe's market capitalization dropped from $9.3 billion on November 1st to $7.1 billion by the end of the month. This represents a decrease of approximately $2.2 billion, or 24% of its total supply.
The synthetic-dollar token, which relies on trading strategies and derivatives rather than direct cash reserves, saw substantial redemptions across various decentralized applications. These outflows indicate that users were selling USDe, withdrawing from liquidity pools, or unwinding positions on on-chain platforms.
The broader stablecoin market currently stands at $311 billion. Dollar-pegged assets continue to maintain their dominance in the sector, accounting for $303 billion of the total value, underscoring the significant role that fiat-backed tokens play in anchoring the cryptocurrency ecosystem.
Investor Takeaway: The contraction of USDe highlights how synthetic stablecoin models can be subject to more volatile confidence cycles compared to their fiat-backed counterparts, particularly in the aftermath of stress events. This supply drop has consequently reshuffled the rankings within the stablecoin market.
October Depeg's Lingering Impact on USDe Redemptions
The pullback experienced by USDe followed an incident in October on the Binance exchange, where the asset briefly traded as low as $0.65. At that time, Ethena's founder, Guy Young, attributed the event to a Binance-specific oracle failure rather than any issues with USDe's collateral structure. Young stated that USDe's minting and redemption functions operated correctly during the turbulence, noting that approximately 2 billion tokens were redeemed across DeFi platforms during that period.
The supply loss for USDe since early October has been considerable. On October 9th, the stablecoin boasted a market capitalization of roughly $14.8 billion, positioning it as the third-largest stablecoin at the time. Since then, it has seen a decline of over 53%. As of the latest CoinGecko reading, USDe's market cap stands at $6.9 billion, and it has slipped to fourth place in market rankings.
Fiat-Backed Stablecoins Showed Resilience and Growth
In contrast to USDe's contraction, fiat-backed stablecoins experienced steady inflows throughout November. Tether's USDT saw an increase of approximately $1.3 billion, bringing its market cap to $184.6 billion. Circle's USDC added about $600 million, raising its supply to $76.5 billion.
PayPal's PYUSD recorded the strongest percentage growth among major stablecoins. Its supply increased from $2.8 billion to $3.8 billion during November, representing an inflow of $1 billion, or a 35% month-on-month increase. Data from DefiLlama indicates that PYUSD has expanded by over 216% since September, when it held a market cap of $1.2 billion. This growth amounts to roughly $2.6 billion in just three months.
Ripple's RLUSD also continued to build momentum. After surpassing the $1 billion threshold for the first time early in the month, RLUSD grew from $960 million on November 1st to $1.26 billion by November 30th, marking a gain of approximately $300 million.
Investor Takeaway: The month of November further widened the gap between different stablecoin models. Fiat-backed stablecoins collectively grew by $3.2 billion, while USDe experienced a significant shedding of supply. This trend suggests a market preference leaning towards fully backed structures following recent periods of volatility.
Market Shift Indicates Preference for Reserve-Backed Assets
The data from November points towards a rotation back towards fiat-backed assets. USDT, USDC, PYUSD, and RLUSD all experienced inflows as traders, on-chain participants, and liquidity providers consolidated their positions around tokens with more transparent reserve frameworks. Synthetic models like USDe continue to be actively utilized within DeFi, but they tend to face more pronounced demand swings during periods of heightened redemption activity.
The October depegging episode likely contributed to increased caution among users, even with Ethena's reassurances regarding the underlying mechanism functioning as intended. As the overall stablecoin market continues to approach new highs, competition between different collateral models is intensifying. The latest market snapshot suggests that users are favoring reserve-backed tokens in the wake of recent volatility, while synthetic alternatives are adapting to shifting confidence cycles.