Ethena, a new player in the blockchain industry, is seeing an increase in popularity as more crypto investors seek its solutions. The token, ENA, was valued at $1.1065 on Sunday morning, below its peak but still significantly higher compared to earlier this year. Ethena's market cap has surpassed $1.5 billion.

The surge in Ethena's performance is largely due to the growing demand for its stablecoin, USDe, which has quickly become one of the top coins in the market with over $2.3 billion in assets.

Despite the success of USDe, concerns have been raised about its peg, drawing comparisons to Terra, a system that faced a downfall in 2022.

Ethena aims to provide yield to its holders, unlike competing stablecoins like Tether and USD Coin that do not offer any returns. USDe rewards its 147k holders with an annual APY of 17.2%, much higher than what is typically offered by corporate bonds.

Although USDe has the potential to outperform the market, there is a risk factor to consider. Unlike USDT and USDC, USDe is not directly backed by US dollars but instead relies on an arbitrage strategy known as cash and carry, which can be risky as seen in the collapse of Terra Luna.

While history has shown the success of this strategy, there is always a possibility for things to go wrong, as demonstrated by the collapse of Terra, which resulted in significant losses. Investors should be cautious, especially amid the recent downturn in the cryptocurrency market.