Ethena Labs, the creators of USDe, have announced the incorporation of Bitcoin (BTC) as backing into their synthetic dollar-pegged offering. The move aims to significantly scale USDe’s supply from its current $2 billion mark. BTC’s role in enhancing USDe’s scalability is emphasized, citing its expanding open interest in major exchanges. Over the past year, BTC’s open interest has surged from $10 billion to $25 billion, outpacing the growth of Ethereum (ETH) derivatives.

BTC also provides superior liquidity and scalability for delta hedging, offering a more secure environment for USDe users. Historical data shows BTC’s resilience during bear markets, outperforming ETH in terms of funding yields. Despite lacking an inherent staking yield similar to that of staked Ether, BTC's staking yields of 3-4% are less impactful during bullish market conditions, where funding rates can surpass 30%.

Ethena uses a delta hedging approach within the derivatives market to maintain USDe’s peg. This involves potentially holding short positions in Ether or ETH-related derivatives, which yield gains if the asset’s value decreases. As a result, Ethena can mitigate most of the downward fluctuations in USDe’s collateral.

With the integration of BTC, Ethena Labs aims to strengthen USDe’s backing, ultimately providing a safer and more reliable product for its users. The move also aligns with the company’s vision for the second season of the Sats Campaign, which is focused on expanding BTC integration. As of April 5, users will have transparent access to BTC backing positions through Ethena’s dashboards.