Ethena (ENA) Rose 9% This Week as Ethereum Fell 4%. Can It Keep Outrunning ETH?

Ethena (ENA) (CRYPTO:ENA) has risen 8.8% in the past week, while Ethereum (CRYPTO:ETH) experienced a decline of 4.3%. ENA is trading at about $0.20, up 4.4% in just 24 hours.

However, despite this weekly gain, ENA’s overall performance is concerning. The token is still down 9.6% over the last 14 days and 26.1% over the past month, trading 86.5% below its all-time high. Thus, while this past week was positive, it only slightly mitigated the sharp drop earlier in October.

Interestingly, ENA rose even as Arthur Hayes, a prominent crypto trader and co-founder of BitMEX, sold the token. According to data from on-chain tracker Lookonchain, Hayes sold 14 million ENA, valued at $2.7 million, while offloading $28.8 million worth of various tokens, primarily ETH and ENA, and securing a profit of $6.7 million.

Why Did ENA Rise Despite Hayes’ Selling?

The surge in ENA’s price from October 19 to today may reflect a shift in market dynamics after a wave of selling earlier in the month. On October 5, the Ethena Foundation released all remaining locked tokens for early investors, flooding the market with new supply.

This led to a significant drop in ENA’s price through October 19, exacerbated by forced liquidations—when exchanges close borrowed positions due to losses—and selling pressure from large holders.

Hayes’ recent sales reflect his decision to close all trading positions for his fund, Maelstrom, as he locked in profits on ETH, ENA, and other altcoins, citing economic and geopolitical uncertainties as reasons for his cautious stance. He predicted the market might need to decline further before it can rebound, and he plans to stay out until conditions improve.

However, Hayes directed 14 million ENA to Cumberland, a large over-the-counter trading desk that conducts trades privately. Because those trades happen away from the public order book, that could help explain why ENA absorbed $2.7 million in sales without a significant price drop.

It’s also uncertain how much of ENA’s recent price increase came from short sellers being forced to buy back into the market. Short sellers profit when prices fall, so a rising price can compel them to cover their positions, driving the price up further without genuine new demand. This buying typically stops once short positions are cleared, which may lead to a decline after an initial spike.

ENA Outran Ethereum, Bitcoin and Solana as the Majors Slipped

While Bitcoin (CRYPTO:BTC) and Solana (CRYPTO:SOL) were also slipping this week, ENA climbed from around $0.19 on October 19 during its recent upswing. In contrast, ETH traded near $2,301, just below its recent lows of about $2,308 on October 25 and $2,313 on October 15. After peaking around $2,524 on October 21, ETH was notably active on October 22, opening at roughly $2,472 and closing at $2,386.

Additionally, Bitcoin dropped from approximately $81,838 on October 19 to around $79,560. Solana also fell from $105 to $101 during the same period.

Tokens that have been beaten down often show stronger rebounds. ENA’s 30-day drop of 26.1% exceeds ETH’s 13.6% decline, suggesting ENA had more recovery potential once major selling pressure eased.

Ethena’s Business Depends on USDe and Funding Rates

What sets ENA apart is its connection to Ethena’s business performance. Ethena issues USDe (CRYPTO:USDE), a synthetic dollar designed to maintain a stable $1 value through crypto collateral and risk-management strategies. The platform holds various cryptocurrencies like ETH and pairs them with short futures positions that gain value when prices decline, effectively balancing each other out.

These short positions are perpetual futures, meaning they don’t expire and use a funding rate to stay aligned with market prices. When many traders favor long positions, they pay this funding rate to short holders, allowing Ethena to collect income. Therefore, high funding rates boost Ethena’s earnings, benefiting USDe holders and attracting more deposits.

As a result, ENA’s value largely depends on USDe growth and funding rates. When ETH declines, funding rates often drop too, reducing Ethena’s income. Thus, ENA’s rise during ETH’s 4.3% dip suggests easing selling pressure rather than improved business conditions.

Can Ethena (ENA) Sustain Its Outperformance Over Ethereum?

It’s unlikely that ENA will maintain this momentum for long. While it gained in one week, it is still down 26.1% over 30 days, and ETH continues to struggle. Moreover, the buyback initiatives that could support ENA have not yet begun. Ethena passed a governance vote to enable a fee switch that allocates up to 95% of net revenue to ENA buybacks.

However, these buybacks will only start once the USDe supply exceeds $7.5 billion. USDe’s supply ended the third quarter below this threshold, and its market value currently stands at about $4.6 billion.

If ENA falls back below $0.19, its recent rally could be viewed as a short-term bounce in an ongoing decline. However, if ENA holds above $0.19 while ETH rises above $2,524, this outperformance may signal stronger buying interest.

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