Ethena dips amid $106M token unlock — will Aave liquidity risk concerns deepen the slide?

Ethena is trading lower as fresh concerns around liquidity risks and a major token unlock weigh on investor sentiment.

As of this writing, Ethena (ENA) is trading at $0.586, down 2.9% over the last day. Despite rising more than 130% over the previous month, it has dropped 5.6% in the last week. The recent correction occurs as traders assess the impact of a significant supply unlock and growing risks associated with Ethena’s interaction with the Aave (AAVE) protocol.

Token unlock raises supply-side pressures

On Aug. 5, 171.8 million ENA tokens, worth roughly $100 million and accounting for 2.6% of the total supply, were unlocked. Only 41% of ENA’s entire supply has been unlocked so far, and the most recent tranche could add sell pressure on the market, particularly if recipients decide to liquidate.

However, Ethena’s recent growth, driven by strong ecosystem partnerships and growing corporate interest in token-based treasuries, may ease some of this pressure.

Despite the unlock, market activity is still high. The 24-hour spot trading volume for ENA stands at $1.01 billion, a 3.9% decrease. According to Coinglass data, derivatives volume fell 7.6% to $3.19 billion, while open interest fell 3.6% to $1.06 billion, indicating a slight cooling of speculative activity.

Aave exposure draws scrutiny from risk analysts

Market watchers are closely monitoring Ethena’s growing presence on Aave in addition to the unlock. According to an Aug. 2 post by risk advisory firm Chaos Labs, Aave now holds more than 55% of USDe’s (USDE) backing assets, valued at $4.7 billion.

This strategy, known as rehypothecation, uses the same assets to support USDe and produce yield on lending protocols. Despite being prevalent in traditional finance, the dual-use nature of these reserves increases systemic fragility.

Chaos Labs cautions that a deleveraging event, like mass redemptions or waning trust, might lead to a liquidity crunch that would affect both Aave and Ethena. Concerns are growing that too much reliance on a single lending protocol may undermine stability, especially as USDe supply has increased 75% in the last month to a record $9.3 billion.

Ethena technical analysis

ENA’s price action is currently cooling, but important support levels are still in place. At 53, the relative strength index indicates neutral momentum. Bollinger Bands indicate a decrease in volatility following the recent decline from the weekly high of $0.67.

Ethena daily chart. Credit: crypto.news

Most moving averages are still pointing upward. ENA is trading above both its 50-day and 100-day exponential moving averages, which are at $0.414 and $0.389, respectively. Despite the short-term volatility, this supports a longer-term bullish outlook.

A pullback toward $0.52 might be possible if the price breaks below the $0.56–$0.58 range. However, if market conditions stabilize, fresh buying above $0.60 might lead to a retest of $0.65 and above.