Ethena Foundation has opened a governance vote that could direct 95% of net protocol revenue toward $ENA buybacks once $USDe supply reaches tiered milestones. The proposal also includes an end to future monthly investor unlocks.
The market reacted immediately after Ethena Foundation announced the changes on August 27. $ENA rose 10.4% to $0.1677, outperforming a broader market in which 87 of 100 tracked assets declined.
However, the buyback mechanism remains conditional. The first activation milestone requires $USDe supply to reach $7.5 billion, while current supply is below $5 billion. That means the protocol needs roughly 50% supply growth before the first buybacks can begin.
What Ethena proposed for $ENA
The proposal contains four changes: two structural measures that apply regardless of market conditions and two measures dependent on future growth.
Ethena Foundation plans to buy locked $ENA from certain seed investors and end future monthly investor unlocks. Stopping the recurring unlocks would remove a continuing source of token supply that has weighed on $ENA rallies since 2024.
The conditional measures would introduce a governance-approved fee switch. Depending on $USDe issuance milestones ranging from $7.5 billion to more than $15 billion, between 5% and over 15% of gross revenue would be allocated to the Ethena Foundation. Of the collected funds, 95% would be used for secondary-market $ENA buybacks and 5% for growth.
A separate agreement would also place most of the intellectual property and economic benefits associated with the protocol with the foundation and ecosystem rather than with shareholders in Ethena Labs.
Why the $7.5 billion milestone matters
The 95% allocation is significant, but it only applies once the revenue pool is activated. The trigger has not yet been reached.
$USDe supply has fallen below $5 billion, compared with a peak near $15 billion in October and $11.7 billion in August 2025. Public data on stablecoin supply by issuer is tracked by DefiLlama. With the first fee-switch milestone set at $7.5 billion, supply must increase by roughly 50% before the mechanism generates its first buyback.
A fee switch is a governance decision that redirects part of a protocol’s revenue toward token holders, often through buybacks or distributions, instead of leaving the revenue entirely with users or the operating company.
The 95% figure describes the share of a pool that becomes available only above a threshold the protocol is currently well below. An authorization sets a maximum allocation, not a guaranteed schedule of purchases. The more important variables are whether the threshold is reached and how quickly buybacks are executed.
Can $USDe supply return to $7.5 billion?
$USDe has traded at much higher supply levels before, which supports the possibility of a recovery. However, the reason for the previous contraction also creates a risk.
$USDe is a synthetic dollar backed by a delta-neutral strategy. Ethena holds spot crypto assets while shorting equivalent perpetual futures, allowing it to capture the funding rate paid by leveraged long positions. That funding rate generates revenue and generally increases with bullish leverage. Current funding rates across major venues are available through CoinGlass.
The decline from approximately $15 billion to below $5 billion followed weaker conditions in crypto derivatives markets. When funding rates compress, the yield on staked $USDe falls, encouraging deposits to move toward other opportunities. As a result, renewed supply growth depends on sustained bullish positioning in derivatives markets—the same condition that has recently been absent.
The relationship between funding conditions and $ENA valuation was highlighted on August 21, when the token traded at $0.1323 and was estimated at roughly 1.1 times annualized revenue. The low multiple appeared attractive because the market was valuing revenue that investors expected to be cyclical. The subsequent contraction in $USDe supply demonstrated that cyclicality in practice.
What is $ENA’s revenue multiple?
$ENA is trading at roughly 1.2 times annualized revenue, still among the lowest valuations measured for a token with meaningful protocol revenue.
Ethena generated $4,034,157 in fees over a 24-hour period, all of which was recorded as protocol revenue. Annualized, that represents approximately $1.47 billion. DefiLlama updates protocol fee and revenue data daily.
With a market capitalization of approximately $1.8 billion at the current price, $ENA’s valuation is about 1.2 times annualized revenue. By comparison, Hyperliquid trades at approximately 41 times revenue, up from 24 times three weeks earlier. Most tokens in the top 100 have no revenue against which to calculate a multiple.
That valuation remains dependent on the limitations of annualizing a single day of revenue. Revenue generated during favorable market conditions is not necessarily a stable long-term base. It reflects what the model earns when funding rates are positive, while the contraction in $USDe supply shows what can happen when those conditions reverse.
Risks facing the $ENA buyback plan
The main risks include existing emissions, the time required to reach the milestone and the possibility that buybacks will be too small to materially affect the market even after they begin.
Independent analysis has estimated that $ENA faces more than $300 million in scheduled emissions during 2026 at current prices. One model estimates annualized buybacks of approximately $26 million under a particular scenario. On those figures, buybacks would equal roughly 0.1% of daily trading volume, below the 1% to 2% level often considered necessary to have a meaningful market impact.
Ending future monthly investor unlocks changes part of that calculation and may ultimately prove to be the more important immediate announcement. However, emissions that have already been scheduled will not disappear simply because future unlocks are halted.
The proposal also faces a structural trade-off. Revenue directed toward $ENA buybacks is revenue that is not paid to staked $USDe holders. Yet the yield on sUSDe helps attract the deposits needed to expand $USDe supply toward the buyback milestone. Increasing one incentive can weaken the other.
What to watch next
Ethena has proposed directing 95% of net protocol revenue into $ENA buybacks, but the first milestone requires $USDe supply to reach $7.5 billion from a current level below $5 billion. Approximately 50% growth is needed before any buyback can occur.
Ending future investor unlocks is an immediate measure. The buyback program is real but conditional. The market has treated the two announcements as though they have the same effect, even though the buyback depends on a supply base that has contracted by roughly two thirds since October.
The key metric to monitor is $USDe supply, not the 95% headline. Supply growth will determine whether the proposed revenue mechanism reaches $ENA.
This article is for information only and is not investment advice. Crypto assets are extremely volatile and you can lose your entire stake. Always do your own research.
Source: cryptonews.net
