[Ethena's USDe circulating supply has sharply decreased, increasing systemic risk] The Algorithmic Stablecoin Ethena's USDe circulating supply fell by over 40% in October, dropping from a peak of nearly 15 billion USD to around 8.5 billion USD. This exposes the vulnerability of its revenue model during times of market instability and its excessive reliance on arbitrageur confidence.

The USDe of Ethena mainly relies on the positive returns from the perpetual futures funding rate to maintain a high yield.

However, market volatility has led to a decline in funding rates, even turning negative, resulting in lower user yields and triggering large-scale redemptions and unstaking, causing a sharp contraction in supply. This supply crash exposed the potential systemic risks of the USDe model. When market sentiment shifts towards risk aversion or deleveraging, its yield mechanism will inversely amplify redemption pressure, contrasting sharply with the issuance trends of traditional stablecoins like USDC and USDT. Although overall market sentiment is warming up, the drastic reduction in USDe's supply serves as a reminder for investors to remain vigilant about stablecoin products with high leverage and complex arbitrage mechanisms.