How Ethena Became the Most Levered Bet After Fed Rate Cuts

When the Fed slashed rates, one protocol went nuclear on leverage—and redefined yield farming's risk frontier.

The Delta Neutral Engine

Ethena's architecture bypasses traditional banking channels entirely. It shorts futures against spot staking positions—creating synthetic dollars that capture both staking yields and futures basis spreads. No banks. No intermediaries. Just pure, algorithmic leverage.

The 27% APY Mirage

That staggering yield? Built on cascading assumptions: perpetual futures funding rates staying positive, collateral remaining liquid, and arbitrage mechanisms not breaking under volatility. One crack—and the entire edifice trembles.

DeFi's High-Wire Act

Traders pile in, chasing returns legacy finance can't touch. But when leverage compounds, so does fragility. The protocol's TVL balloons—but so does its systemic footprint. A 10% drop in ETH could trigger a reflexive liquidation spiral.

Ethena doesn't just bet on rates—it bets on market structure itself. And if that bet fails? Another 'algorithmic stablecoin' becomes a cautionary tale—and Wall Street gets to smirk about 'DeFi learning risk management the hard way.' Again.

Key Takeaways

ENA liquidity surged as TVL hit $12.049 billion, Open Interest spiked to 19.74% and Fed rate cut speculation fueled bullish momentum. Can ENA sustain momentum toward $0.85?

Ethena’s [ENA] price action in the past 24 hours showed a significant surge in liquidity across on-chain and off-chain markets, according to recent analysis.

Further upside could depend on the U.S. Federal Reserve’s next decision on interest rates. An AMBCrypto analysis examined potential price moves for ENA and the factors influencing them.

Liquidity inflow rises fast

Liquidity inflows into ENA were among the highest this week, based on multiple datasets.

On-chain data on DeFiLlama shows that TVL surged by over $100 million in the past 24 hours, reaching $12.025 billion—marking a new all-time high.

Such a surge in TVL suggested that more investors are adding liquidity for a long-term outlook—earning returns while positioning for ENA’s price increase, creating a double-gain effect.

Source: DeFiLlama

In the derivatives market, the bullish sentiment was clear. Data from CoinGlass showed over $300 million in new contracts added, following a 19.74% surge in Open Interest, which ROSE above $1.5 billion at press time.

While this alone did not confirm a bullish trend, the simultaneous spike in derivatives trading volume and persistently positive Funding Rates suggested inflows were dominated by bullish traders.

Could a Fed rate cut spark ENA’s gains?

Ethena Labs’ co-founder stated on X (formerly Twitter) that falling interest rates could trigger another major MOVE for ENA:

“I think Ethena is the most levered asset on earth to falling interest rates.”

His comment referenced Ethena’s stablecoin USDe, which doubled its supply after the U.S. rate cuts entering Q4 2024. He suggested a similar outcome could play out now.

Source: X

AMBCrypto’s review of ENA’s Q4 2024 performance showed a 419% price increase during that period. A similar rate-driven setup could replicate those gains as Q4 2025 approaches.

Price outlook for ENA

In the short term, ENA’s outlook remains bullish as the price broke out of a descending wedge, reclaiming higher levels.

Analysis indicated ENA has broken out of a bullish descending pattern and could reach a new high in the coming days, with a price target of $0.85.

Source: TradingView

Technical indicators reinforced this bias.

The Money FLOW Index (MFI) printed 71.54, signaling strong capital inflows, while the Average Directional Index (ADX) at 38.41 highlighted powerful upward momentum.