The capital deployed by Ethena in market-neutral strategies has dropped from $2 billion to $800 million in just one month. This was highlighted by WuBlockchain analyst SoskaKyle.

The decline began in 2025 when the capital fell over 75% from $5 billion to $1.1 billion. At that time, the sector shifted to a risk-off mode following the launch of the meme coin TRUMP and initial discussions of trade tariffs from the U.S.

Currently, the capital deployed in BTC, ETH, SOL, BNB, XRP, and HYPE markets stands at $791.2 million. This is 71% of last year's minimum and 12.9% of the historical peak in October.

Source: WuBlockchain.

These figures are indirectly supported by the decline in the yield of Ethena's synthetic stablecoin USDe, which is currently at 3.5%, down from double-digit figures in early 2025.

The asset's market capitalization has plummeted from a peak of $14 billion to $5.9 billion.

Source: DefiLlama.

The expert described the trend as unusual, noting that the market was largely moving sideways during this period. He identified three potential reasons:

  1. Gradual closure of profitable but unstable basis trades opened after February.
  2. Increased competition from targeted shorts and hedgers pushing out basis traders.
  3. Weak demand for leveraged longs.

SoskaKyle believes the first two factors played a significant role. Open interest in Bitcoin and other major assets remained stable while positions on Ethena were being reduced. At the same time, funding rates have been negative for an extended period.

What Do the Data Indicate?

Ethena employs cash-and-carry arbitrage based on perpetual futures. The platform's mechanics allow its metrics to serve as a proxy for excess demand for longs—demand that the market cannot satisfy through natural short volumes.

When a trader goes long, Ethena acts as their counterparty, opening a short position while simultaneously purchasing an equivalent amount of the underlying asset. The greater the unmet demand for long positions, the more capital the protocol deploys.

Source: WuBlockchain.

SoskaKyle emphasized that the capital accumulation trend reflects the market's state rather than issues with Ethena. He noted that net demand for longs is currently at a historically low level.

“The market has entered one of the rarest configurations for cryptocurrencies: the volumes of directed long and short positions are nearly equal. Theoretically, this could become the new norm. However, looking at other markets and asset classes, such a balance typically does not last long,” he remarked.

The expert suggested that pressure could be coming from smaller projects like Eigen, Grass, and Monad, as well as venture funds. They need to limit losses, lock in profits, and maintain liquidity.

In such conditions, market participants are more likely to use structured products that short a basket of liquid assets to hedge less liquid tokens.

Sharp price fluctuations in Ethereum may indicate the presence of such products, leading to the closure of short positions in mid- and small-cap altcoins. Another signal is the aggressive displacement of speculative basis strategies, including Ethena's positions.

Recall that in early March, CryptoQuant analyst Axel Adler reported a record outflow of Bitcoin from exchanges.