The latest trend in stablecoins is the rise of Ethena (USDe), catching the attention of Bitwise President Teddy Fusaro. In a recent Twitter thread, Fusaro highlighted that USDe might be the fastest-growing USD-denominated asset in the history of crypto. Describing USDe as operating similarly to an ETF, Fusaro noted that the protocol accepts contributions from authorized participants (APs) and issues units in the form of USDe tokens. The protocol then invests in a predetermined portfolio consisting of Bitcoin (BTC), Ethereum (ETH), ETH liquid staking tokens, and Tether USDT. To counterbalance these assets, USDe also maintains equally weighted short perpetual futures exposure, creating a delta-neutral portfolio that retains a consistent dollar-denominated value over time.
The Unique Yield-Generating Mechanism
One of the key features of Ethena’s portfolio is its ability to generate yield through the staked ETH and futures interest. This yield is then distributed to all holders of USDe, providing them with an additional source of income. Furthermore, holders have the option to stake their USDe tokens to receive sUSDe and earn even more yield. Fusaro emphasized the potential for significant interest payouts at scale, describing it as a gargantuan total addressable market. This innovative approach to generating yield sets USDe apart from traditional stablecoins like USDT and USDC, which do not distribute profits to stablecoin holders.
Despite its rapid growth and unique yield-generating mechanism, USDe still faces certain risks and challenges. According to Fusaro, these risks include exchange counterparty risk, exchange hacking risk, smart contract risk, and the potential for negative futures funding. While these risks are inherent in any asset, it is crucial for investors to be aware of them when considering USDe as an investment opportunity. Fusaro also highlighted the importance of learning from past stablecoin failures, such as the collapse of TerraUSD in May 2022, which experienced a downward spiral alongside the network’s LUNA token due to internal algorithm issues.
Fusaro admitted that he does not have a definitive answer on whether USDe will succeed in the long run. However, he acknowledged the rapid growth and immediate success of the stablecoin, highlighting the significant support it has garnered within the crypto community. With USDe now boasting a market cap of $2.36 billion, compared to less than $1 billion just a month ago, it has quickly become one of the largest stablecoins in circulation. The future of Ethena (USDe) as a new stablecoin contender remains uncertain, but its recent successes and innovative approach to generating yield have captured the attention of many in the crypto space. Only time will tell whether USDe can establish itself as a dominant player in the stablecoin market.
