Since its token generation event on April 2nd, Ethena’s token has seen a lot of activity as detailed below:

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As of time of writing, $ENA sits at a $1.5 billion market cap and $16 billion fully diluted valuation. 

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Season 2: The Sats Campaign

The 2nd of April stood out as a landmark day for Ethena, marking not only the ENA airdrop but also the launch of Ethena's second campaign. This campaign sees a shift from "Shards" to "Sats", reflecting one of the protocol's most ambitious product enhancements yet - the incorporation of BTC as a reserve asset.

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This change opens the door for Ethena to an additional ~$25 billion in open interest for delta-hedging purposes, more than doubling the existing volume from ETH perpetual futures. This figure does not take into account an additional $11 billion in open interest from the CME.

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BTC funding rates have consistently paralleled those of ETH, revealing a significant yet untapped opportunity for generating real yield in the cryptocurrency space.To date, BTC funding on major exchanges has averaged ~22% on about $25 billion of open interest. Considering half of this open interest results in fee revenue for short positions, there's a potential for approximately $2.75 billion in annual gross cash flow.

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With Ethena's delta hedging adding over 1 billion in supply in just a month, representing roughly 15% of ETH open interest, there has yet to be a noticeable impact on ETH funding rates, which currently stand at ~60%.

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Maintaining the protocol's ability to scale at the pace demanded by the market is crucial, and leveraging BTC perpetual futures significantly enhances USDe's scalability.

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The Sats Campaign is aimed at supporting this growth, scheduled to run for five months until the 2nd of September or until the USDe supply reaches $5 billion, whichever comes first.

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Enhanced Rewards for Season 1 Participants:

To incentivise and reward the initial participants of the Ethena ecosystem from Season 1, Season 2 introduces increased rewards for these early adopters, under certain conditions:

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A 20% increase in the rate of Sats earned will apply to existing Season 1 positions in Season 2 for users who:

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a) comply with the vesting conditions detailed in the latest guidelines, or

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b) inject additional USDe into the new incentive program using the same wallet.

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Specifically, if a user retains their Season 1 position without any changes, they become eligible for elevated rewards in Season 2, as follows:

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For holding USDe, the reward rate will be 20x Sats per day, compared to the previous rate of 10x Shards.

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Liquidity provision with USDe in the LP Curve will now garner 25x Sats per day, an increase from 15x Shards.

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Depositing USDe on platforms such as Morpho, Gearbox, or similar will yield 20x Sats per day, an enhancement from 10x Shards.

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New Rewards for the Upcoming Season

With the advent of a new season, Ethena introduces fresh reward opportunities, including several new partnerships:

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MakerDAO and Morpho Partnership:

Recently, Morpho initiated USDe and sUSDe/DAI pools in collaboration with MakerDAO. As part of Maker’s strategic Endgame plans involving Ethena, 100 million DAI was allocated to these pools through Spark, enhancing liquidity. This allocation was fully utilised within hours, offering users 7x shards for USDe collateral and 5x shards for sUSDe collateral.

For Season 2, the caps on Morpho will be raised, with MakerDAO poised to significantly boost its contribution. The new rewards for depositing collateral and borrowing will be as follows:

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• 20x sats for USDe collateral
• 5x sats for sUSDe collateral

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To manage the risk of rapid accumulation across the DeFi sector, the use of leverage will be closely monitored. Initially, an additional cap of $400 million in USDe rewards on Morpho is set, bringing the total to $500 million.

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Further announcements will provide details on when users can start depositing under the new caps on Morpho to earn these rewards.

Mantle, Pendle, and EigenLayer Points Integration:

Ethena is set to further its collaboration with Mantle, presenting Mantle users with numerous opportunities to earn Sats in Season 2.

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The Pendle pools, introduced in Season 1, quickly reached their 250 million capacity. In Season 2, new Pendle pools will be available on Mantle, offering a more cost-effective way for users to engage due to lower gas fees compared to the ETH Mainnet. Participants can trade USDe YT, PT, or contribute liquidity to pools, earning not just Sats but also Eigenlayer points.

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Reward Details:

• 20x sats for USDe held in USDe YT or LP positions
• A cap of 100 million
• Eigenlayer points at a rate of 0.0012 EL per USDe per day
• The cap for Eigenlayer points is calculated as 100 million * 0.0012 * 115 days = 13,800,000 points

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Season 2 also introduces additional avenues to earn Sats within the Mantle ecosystem:

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• Acquiring USDe on Mantle will yield 2x Sats for USDe and 1x Sats for sUSDe.
• Merchant Moe: Users providing liquidity and locking LP tokens can earn 20x Sats, with a total lock cap of 20 million, of which $10 million is in USDe.
• INIT: Utilising the USDe Looping Hook on INIT allows for earning 20x Sats per USDe, with a cap of 20 million.
• IntentX: Using USDe as collateral enables earning 20x Sats per USDe, with a 10 million cap.

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These integrations with Mantle are supported by key partners:

• RedStone and Pyth: Provide Oracle Feeds for USDe / sUSDe.
• Stargate: Acts as the bridging partner for USDe / sUSDe.
• Native: Facilitates RFQ Swaps for USDe / USDT.

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Disclaimer: This research report is exactly that — a research report. It is not intended to serve as financial advice, nor should you blindly assume that any of the information is accurate without confirming through your own research. Bitcoin, cryptocurrencies, and other digital assets are incredibly risky and nothing in this report should be considered an endorsement to buy or sell any asset. Never invest more than you are willing to lose and understand the risk that you are taking. Do your own research. All information in this report is for educational purposes only and should not be the basis for any investment decisions that you make.

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