Ethena Labs drops from contest to issue Hyperliquid's USDH stablecoin

Ethena, a DeFi protocol based on the Ethereum blockchain, has formally withdrawn its proposal from the Hyperliquid ahead of the upcoming vote, citing community concerns. The project team acknowledged concerns regarding its non-native nature to HYPE.  

The Ethereum-based protocol’s decision followed a series of active discussions between the project team, validators, and the community, which raised several concerns about its alignment with Hyperliquid’s ecosystem.

Three key things were picked from the discussion, including Ethena not being a Hyperliquid-native project, it operates additional product lines outside its USDH stablecoin, and its ambitious extension beyond a single partner.

Native Markets wins community support over Ethena 

Guy Young, founder of Ethena, acknowledged that the community’s concerns were valid, and they accepted the pushback. He confirmed that they were stepping down to allow validators to direct their support to something else. He also extended congratulations to the Native Markets project, which secured the community’s backing.

The last few days have been incredible to witness. I've never seen a community rally around and engage with passion like this before.

Following direct discussions with individuals in the community and validators we have taken onboard some of the concerns, namely:

-Ethena is not…

— G | Ethena (@gdog97_) September 11, 2025

Ethena acknowledged that Native Markets’ success showed the ethos of the Hyperliquid community, where emerging players can gain trust and traction regardless of size, background, and financial resources.

The firm defended Native Markets’ credibility, which had received criticism over questions of credibility. The Ethereum-based protocol message showed that Native Markets’ platform-level playing field allows any project to win community support when it shows vision and commitment.

Young expressed gratitude towards those who supported its proposal, describing it as a privilege and a testament to the growing quality of teams in the space. He also acknowledged other teams’ proposals as further proof of the ecosystem’s rising standards.

The Ethena project team reiterated that the company roadmap remains unchanged, emphasizing that it will continue to build new products in collaboration with native teams.  

In the previous plan, Ethena downplayed the role of T-bill yields, stressing that taking small returns in a declining interest rate environment was the least interesting part of its proposal. The team, however, reiterated its focus on building advanced products and infrastructure to strengthen Hyperliquid. 

“We are simply going to do everything we said we would; we will be putting our full force behind making that a success, despite the outcome here.”

-Guy Young, founder of Ethena

The Ethereum-based protocol reaffirmed its competitive stance in the market and promised to continue striving to outpace rivals through product innovation. 

Ethena’s USDe hits $13.12B market cap, maintaining third position

USDe, Ethena’s stablecoin, has increased its market cap to $13.12 billion, with a circulating supply of 13.19 billion USDe. The stablecoin has maintained position three against other issuers behind Tether USDT and USDC by market cap. Tether USDT leads with a circulating supply of approximately 169 billion USDT, followed by USDC’s approximately 72 billion. 

However, not everyone is convinced of Ethena’s strategy. Cryptopolitan reported recently that the S&P Global flagged USDe as carrying higher risk scores due to its dependence on derivatives. Chaos Labs also raised concerns over possible rehypothecation and liquidity strains if funding rates go outside the normal range. USDe uses strategies that combine stablecoin issuance with DeFi yield loops. 

Some on-chain protocols, such as Aave and Pendle, have enabled recursive lending, which increases returns for issuers like USDe. It allows users to deposit USDe, borrow against it, and redeploy the proceeds into additional yield-generating positions, compounding the proceeds. 

Hyperliquid’s token HYPE on the other hand has recorded a price increase of 3.52% today, trading at $56.25. It has a market cap of 18.78 billion with a 24-hour trading volume of approximately $614 million. The token has a circulating supply of 333.92 million HYPE according to CoinMarketCap data. 

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