Key takeaways
What sparked the recent squeeze on Ethena’s ENA token?
The drop of Ethena stablecoin USDe to $0.65 amid a market-wide altcoin crash triggered bearish sentiment and investor withdrawals.
What price levels are critical for the ENA’s next action?
ENA needs to reclaim the $0.31-$0.38 support zone to target $0.85, or risk falling towards $0.265 if the selling continues.
The crypto market has seen one of its biggest pullbacks in recent months, severely affecting altcoins. After remaining above the $4 trillion threshold, the market capitalization fell to $3.75 trillion at press time.
Altcoin-backed stablecoins such as USDe have not been spared from the decline and, by extension, Ethena (ENA) has also felt the pressure.
Stablecoin depeg shakes the ENA
Ethena’s yield-bearing stablecoin, USDe, experienced a de-anchoring event following the sharp drop in altcoin prices in the market.
Stablecoins are designed to maintain a 1:1 peg to the US dollar, which typically requires various strategies including fiat reserves or altcoin collateral, such as the case of ENA.
Depeg saw 1 USDe trading at $0.65 instead of the expected buyback ratio of 1:1.
Source: TradingView
The event sparked debate within the crypto community, with some comparing it to the Terra Luna UST collapse of 2022, which lost its peg to the dollar and triggered a major market downturn.
Notably, USDe then returned to its 1:1 ratio. The official Ethena account acknowledged the depeg but assured users that the stablecoin remains secure, stating:
“The USDe will therefore be more overcollateralized than yesterday following these events.”
The statement confirmed that holders had little to fear in terms of asset security.
Investors divided on ENA
The market remains divided on Ethena’s native token, ENA, as different investor groups take opposing positions.
In the spot market, investors continue to accumulate ENA, purchasing approximately $4.59 million worth of tokens on October 11.
However, this is the lowest daily accumulation in three days, compared to the $25.75 million purchased earlier in the week.
Source: CoinGlass
Interestingly, the bullish sentiment seen in spot markets contrasts with on-chain data. Ethena’s total value locked (TVL) saw a massive outflow of $1.25 billion in the past day alone.
Investors appear to be withdrawing their funds from the long-term ENA and possibly offloading their positions to derivatives exchanges, likely to cut losses or as part of a broader bearish move following USDe’s volatile performance.
Market Outlook
The broader outlook shows that the market is currently moving against ENA as the token is trading below a critical support zone between $0.31 and $0.38.
This area remains a key level that the ENA must recover for any possible recovery. Failing to exceed this threshold could push the token down.
If ENA returns to this level, it could rebound towards the $0.85 region. However, a continued decline could see the asset fall as low as $0.265, the next major support zone on the chart.
Source: TradingView
