Stablecoin Market in Flux: Ethena and Hyperliquid Challenge Circle as Blockstream Unifies Bitcoin Ecosystem

Ethena Launches Counteroffensive in Stablecoin Competition

Competition for stablecoin market dominance is intensifying: DeFi protocol Ethena is launching an offensive with its new "HyENA" platform and aims to establish its USDe stablecoin as the default collateral for perpetual futures trading in the Hyperliquid ecosystem^[1].

The initiative comes at a critical moment for Ethena. After an initially impressive success story, the protocol recently suffered a significant setback when collapsed funding rates nearly halved USDe's market capitalization^[1]. With HyENA, founder Guy Young's team is attempting to recover lost ground.

Double Returns for Traders – USDC Users Come Up Empty

The strategic partnership between Ethena and Hyperliquid is likely to particularly displease Circle CEO Jeremy Allaire^[1]. While Circle's USDC token has already been replaced on the "standard" Hyperliquid platform by USDH, HyENA now enables further displacement: traders can earn double returns on the new platform, while USDC users receive no interest payments^[1].

The development demonstrates how fiercely contested the second place in the stablecoin market has become. While Tether maintains undisputed market leadership with USDT, competition among subsequent providers is intensifying^[1].

Blockstream Simplifies Bitcoin Layer Interoperability

Parallel to stablecoin sector developments, Bitcoin infrastructure is working to improve interoperability between different network layers. Blockstream released a significant innovation with version 5.1.4 of its wallet application: direct swaps between the Lightning Network and the Liquid sidechain^[2].

The update enables users to send and receive Lightning payments with Liquid Bitcoin (LBTC) without having to operate their own Lightning payment channels^[2]. The swap functionality is provided by Boltz, a non-custodial Bitcoin bridge that enables atomic swaps between different Bitcoin layers^[2].

Security Through Cryptographic Contracts

The swaps are based on cryptographic Hash Time-Locked Contracts (HTLCs), which ensure that transactions are either completed in full or automatically refunded. At no point does a third party take custody of user funds^[2].

"We are building the all-in-one Bitcoin experience," Blockstream stated in a release announcement^[2]. The integration provides access to the Lightning payment network without requiring users to manage channels or incoming liquidity.

Outlook on Further Integration

Blockstream announced that on-chain Bitcoin swap functionality is planned for a future update^[2]. Once implemented, users will be able to switch between Lightning, Liquid, and on-chain Bitcoin within the app. This would enable movement of funds between cold storage and both layer-2 networks without routing through centralized exchanges^[2].

The Lightning-Liquid swap function is now available in version 5.1.4 of the Blockstream app^[2]. Both developments – Ethena's HyENA initiative as well as Blockstream's expanded wallet functionality – illustrate the rapid evolution of the crypto ecosystem and ongoing competition for users and market share.