Ethena’s ENA Soars 43%. What’s Fueling the Explosive Rally?

DeFi protocol Ethena’s governance token ENA has surged 43% this week, climbing above 50 cents. It’s now the second-best-performing top 100 token by market value, narrowly trailing Curve’s CRV, per Coingecko.

The catalyst for the rally is speculation about the activation of the fee switch mechanism for Ethena staked ENA (sENA) token holders, according to Kairos Research.

The fee switch, initially proposed by market maker Wintermute and later approved by the Ethena Foundation in November 2024, enables the sharing of protocol revenue with sENA holders. The revenue primarily comes from mint fees on USDe, Ethena’s synthetic dollar, which has an over $6 billion market cap, as well as other protocol revenue streams, and is shared once specific parameters are met.

These parameters include a USDe circulating supply exceeding $6 billion, cumulative protocol revenue surpassing $250 million lifetime, USDe integration on four of the top five centralized exchanges by derivative volumes, and the reserve fund growing to 1% or more of the USDe supply. Additionally, it calls for widening the spread between the annualized percentage yield on staked USDe (sUSDe) and other benchmarks, such as Aave’s USDC.

As of Sunday, the USDe’s circulating supply, cumulative protocol revenue, and reserve fund exceeded the thresholds mentioned above, according to data tracked by Kairos Research.

USDe metrics. (Kairos Research)

“ENA is unique, where the fee switch parameters have already been established, but require certain thresholds to be met or exceeded for it to be formally activated, in which case sENA holders would be the fee recipients,” Kairos Research said on X.

It added that the last parameter, tracking the APY spread, was yet to be met, with market flows suggesting it could happen soon.

“The influx of staked sUSDe vs other key benchmarks like Maker/Sky’s sUSDS signal that capital allocators expect the spread to widen in Ethena’s favor,” it noted.

Aside from the potential fee switch activation, the overall bullish trend in the crypto market is adding to the ENA token’s upward momentum. The protocol’s USDe has attracted over $750 million in fresh inflows recently, as noted by CoinDesk early today.

Read more: Ethena’s ENA Soars 20% as Protocol Sees $750M Inflow Amid Rising Crypto Funding Rates