ENA price dips 6.5% despite fee switch milestone and buyback potential

The Ethena Foundation announced that the fee switch parameters set by the Risk Committee have been met. This opens the door to launching the ENA fee switch, eventually sharing some of the protocol’s revenues with token holders. 

The Ethena Foundation announced that the protocol reached the fee switch parameters as set by the Risk Committee. The ENA fee switch is the technology that deemed the protocol stable enough to share some of the revenues with ENA holders. 

The Ethena Risk Committee will have to sign off on the implementation of the fee switch, then put up a proposal for a community vote. 

The fee switch was expected in the past week. The holders of staked ENA (sENA) may receive 4.5% to 15% annualized yield. Based on the current Ethena fees of $50 to $60M monthly, the revenues will be distributed over $750M in staked ENA. 

Fee switch will bring additional utility to ENA

The fee switch milestone means ENA staking is no longer used for airdrops only. Additionally, the protocol will unlock $500M for buybacks, further rewarding the holders with potential market price growth. 

The fee switch was reached as Ethena carried a record value locked of over $13.2B. The other conditions to be fulfilled included a supply of USDe over $6B. The USDe market cap is now more than double the target at $13.7B. The second condition was for the protocol to reach cumulative revenue of $250M. 

The other milestone was for USDe to be added to four of the top five centralized exchanges with the highest derivative volumes. The condition was fulfilled after the token’s recent addition to Binance. 

The only element remaining is the technical governance process. The fee switch may mean Ethena may create up to $100M buying pressure based on current activity and fees. 

ENA price drops despite positive news

The news of eventual buybacks and fee sharing did not turn immediately bullish for ENA. The token slid soon after the news, losing around 6.5% to $0.70. 

ENA open interest is still around $1.10B, with over 77% long positions. However, a handful of short positions paid significant fees to hold, in expectation of a deeper crash. For now, the ENA price is still close to its usual range. 

Long positions were attacked first, with $6.15M liquidated in the past few hours. On Hyperliquid, ENA is extremely bullish, with over 81% of traders keeping long positions. The attempt to liquidate longs may be the reason for the price drop, while there is also pressure for ENA to expand following the fee switch news. Some of the short positions have significant unrealized gains, and traders may still try to cause an ENA correction to gain from liquidating more of the long positions.

Want your project in front of crypto’s top minds? Feature it in our next industry report, where data meets impact.