Ethena Labs, a Decentralized Finance (DeFi) protocol, has revealed the inclusion of Bitcoin as one of the underlying assets for its synthetic dollar-pegged stablecoin. USDe, which is already backed by ETH, ETH-based liquid staking tokens, and Tether (USDT), will now benefit from the addition of Bitcoin.

This decision, according to Ethena Labs, is aimed at significantly expanding USDe's scalability and providing users with a more secure product.

The move to include Bitcoin comes as the derivatives markets for Bitcoin outpace those based on ETH. Ethena's data indicates that Bitcoin's open interest has surged by 150% to reach $25 billion over the past year, compared to a 100% growth in ETH open interest to $10 billion in the same period. The increased liquidity and scaling potential of BTC derivatives markets are driving factors behind Ethena's decision.

Before the addition of Bitcoin, USDe was backed primarily by Ether (ETH), Tether (USDT), and ETH-based liquid staking tokens, with proportions of 45%, 38%, and 17%, respectively.

Most of this collateral is sourced from platforms such as Binance, ByBit, OKX, DERibit, Bitget, and BitMEX. While Bitcoin does not offer native staking yield, Ethena argues that staking yields of 3-4% are relatively insignificant during bull markets when funding rates can exceed 30%. By reducing its reliance on the traditional banking system, Ethena aims to differentiate its synthetic dollar product. Currently, USDe ranks as the fifth-largest among US-dollar-denominated products, according to data from CoinGecko.