Sky Protocol’s stablecoin USDS flips Ethena’s USDe

Sky Protocol’s synthetic stablecoin, USDS, has now increased its supply ahead of Ethena’s USDe. The DeFi protocol, which still carries both USDS and DAI, is expanding despite the slowing Ethereum (ETH) market.

Sky Protocol keeps expanding the supply of USDS, its synthetic stablecoin. The supply is now ahead of Ethena’s USDe, which had to be burned in response to the slowing Ethereum (ETH) market. Ethena’s stablecoin supply reflects the protocol’s shifting strategies when the ETH market loses its bullish trend.

Ethena decreased the supply of USDe as market conditions shifted in the first months of 2025. | Source: Dune Analytics

Both USDe and USDs have a niche role among other stablecoins. In the past few months, USDe was the leading asset, while Sky Protocol’s stablecoins were trying to catch up. The supply has now flippened, based on the shifting conditions in DeFi space.

The flippening between USDe and USDS happened in the past month. Ethena’s stablecoin still dominated at the end of 2024, with over 46% share of the synthetic stablecoin market. USDe and USDS are the most prominent synthetic or asset-backed stablecoins that are battling for influence. The crypto market still carries 228.3B in new stablecoins, with a mix of large asset-backed coins and new protocols with riskier assets. For now, Ethena and Sky Protocol are the most battle-tested during varied market conditions.

Ethena’s USDe decreased the token’s supply in the past month, tracking the worsening market conditions. USDe was burned to bring down the supply from over 6B tokens to 5.4B tokens, with the latest retirement of tokens happening on March 17. The lowered USDe supply aims to make Ethena more robust when surviving the unfavorable market. Ethena is also suffering from the overall deleveraging of the crypto market, as it relies on funding fees for most of its income.

Sky Protocol expands USDS influence

Sky Protocol carries a total of 4.9B USDS tokens, still being swapped from DAI. The total supply of the Sky Ecosystem stablecoins is over 8.4B tokens, split between the different vaults and use cases.

Sky, formerly MakerDAO, is expanding the influence of USDS. The stablecoin is moving into several chains and protocols in the past few months.

Since January, USDS has grown its supply on Base and Solana, while diminishing its activity on Ethereum. The success of Sky Protocol stems from being a proxy for Aave vaults, which currently carry the highest liquidity.

USDS continues to grow its supply despite the lowered earnings rate. The stablecoin carries passive income of 6.5%, down from a recent peak at 12.5%. Sky Protocol held votes to adapt the savings rate based on market conditions, reflecting the market downturn since its peak at the end of 2024.

The Sky Ecosystem is still in the top 10 of DeFi projects, though falling behind Ethena’s activity. The expanded usage and turnover of USDS may boost the protocol’s influence as a source of passive income.

Sky Protocol flips Ethena’s revenues

Another sign for the liveliness of Sky Protocol is its baseline fee and revenue level. Ethena’s performance has shown signs of slowing down in the past months. Weekly revenues peaked at over $21M at the end of 2024, to around $3M weekly in Q1.

Sky Protocol reached over $13M in weekly fees in December, though still achieving over $8M in weekly fees. Based on Token Terminal data, Sky Protocol retains relatively stable fee levels, with regular weekly fluctuations and recoveries.

All DeFi protocols are showing bearish signals in terms of token dominance and value locked. However, even under those conditions, protocols are competing for attention and liquidity.

Despite the slowing market, the MKR token bounced from its lows and even reached a one-week high at $1,223.18. ENA traded around $0.36, in the middle of its range for the past year.

DeFi is still mostly linked to Ethereum, with risk for lending protocols and collaterals, as ETH sank under $1,900.

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