Can Ethena become a new generation of synthetic dollar?
Colin Wu . 2024-05-08 . Data

Author: defioasis

By holding LST and an equivalent amount of perpetual contract short positions, Ethena has created a delta-neutral CDP, pioneering a new chapter in synthetic dollars . The yield on sUSDe (staked USDe) actually comes from basis trading, with the current sUSDe APY exceeding 11%. According to Etherscan data, as of May 8, the supply of USDe has reached 2.29 billion, making it the fifth largest stablecoin/synthetic dollar after USDT, USDC, DAI, and FDUSD.

USDe vs UST: How its different

The yield and growth rate of USDe inevitably remind people of UST in the past, where Anchor UST offered an annual yield of 20%, but ultimately collapsed overnight. However, there are significant differences between the two.

Firstly, UST is an algorithmic stablecoin with mechanisms for arbitrage, minting, and burning between LUNA and UST to maintain parity with the dollar, whereas USDe has real backing assets hedged with delta-neutral positions.

Secondly, USDe has a real business, namely basis trading, which can generate income or losses. Simply put, more income can be generated during bullish markets with high positive funding rates; losses occur during bearish markets with prolonged negative funding rates if the reserve fund Ethena has in place is drained.

UST’s borrowing demand imbalance meant that it could not sustain high deposit rates in the long term; the so-called returns ultimately came from subsidies from the treasury reserves. Ethena, by comparison, is earning very real revenues and is not subject to a “death spiral”.

Overall, the nature of USDe is not a Ponzi but utilizes a validated trading pattern — basis trading, with clear sources of income and well-defined risks, including funding, liquidation, custody, exchange failure, and LST collateral risks. Ethena’s official documents also clearly explain these five risks.

USDe Growth

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USDe has gone through several stages of development. At the end of last year, USDe first opened its pre-release to large-scale investors, and its supply increased by 800% in one week to over ten million dollars, indicating the interest of large holders or institutional investors. In mid-February of this year, influenced by a new round of $14 million financing and shard activity incentives, USDe reached new levels of growth, with daily minting volumes of tens of millions becoming the norm. On April 2, Ethena airdropped ENA and opened trading, bringing substantial returns to early participants. At the same time, MakerDAO planned to allocate 600 million DAI to USDe, setting a new historical record for daily minting at 237 million on that day.

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It’s worth mentioning that the Ethena Reserve Fund is funded by a portion of the yield generated from the Protocol assets, which relates to the proportion of USDe that is not staked; and is also capitalized with financing raised from investors. According to Token Terminal data, as of May 8th, after deducting the profit shares of sUSDe holders, Ethena Protocol’s earnings reached $4.45 million over the past 30 days, making it one of the highest revenue-generating protocols in the crypto industry.

USDe now integrates with Bybit as collateral

Prior to this partnership, other dollar assets such as USDT have dominated perpetual future pairs as the primary collateral asset in the industry, but without passing any value accrual to their holders with issuers internalizing all benefits from being utilized as margin collateral. In fact, there is currently >$20bn of USD-pegged collateral being used to margin perpetuals which is capturing no yield for the holder.

Thanks to this integration, Bybit users will now be able to potentially accrue value on their USDe collateral margining perpetual futures through Bybit. Receiving a yield on the collateral asset will unlock greater capital efficiency for users by enabling them to offset funding costs, via simply holding the collateral margining the position. This type of capital efficiency is a first in crypto history.

In addition to the integration described above, USDe held on Bybit — whether held in the user’s account unutilized or used as margin collateral — will receive 20x sats per USDe on top of potential yield from Bybit. There will also be spot BTC and ETH — USDe pairs, as well as USDe integration with Bybit’s Earn products.

Ethena now integrates BTC

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In early April, Ethena added BTC as a collateral asset for USDe, significantly increasing the potential capacity of USDe’s supply. Although BTC does not have a native yield like staked ETH, which is around 4% APY, considering the crazy funding rates exceeding 50%-60% APY during bull markets, this 4% might not be so significant. Currently, USDe includes four major types of collateral assets: BTC, ETH, USDT, and ETH LSTs, distributed across exchanges such as Binance, Bybit, OKX, Deribit, and Bitget. As of May 8, among the mainstream and available cryptocurrency exchanges, BTC Open Interest to approximately $20.37 billion, with Ethena’s share accounting for about 4.58%; ETH Open Interest is $8.23 billion, with Ethena’s share approximately 13.93%. In an ideal situation without considering any market friction, given the current scale of BTC and ETH Open Interest, the supply of USDe still has multiple times the room for growth, and even more now that the protocol has integrated BTC.

Sats Campaign

In the second quarter’s “Points” activity, the naming was changed from the original “Shards” to “Sats,” the smallest unit of BTC.

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In addition to its growing supply, mainstream DeFi protocols have also begun to integrate with USDe, and the adoption rate of USDe is gradually increasing. Ethena’s “Sats Campaign” point activity also provides support for the wider adoption and integration of USDe in the DeFi world. Through analysis of on-chain data, USDe has played a key role in protocols such as Pendle, Morpho, Zircuit, and Curve. Users can partake in the Sats Campaign by going to

DeFi yield protocol Pendle Finance: SY Ethena USDe has captured 17.2% of the USDe supply, even exceeding the amount of sUSDe staked; users can use USDe to execute combined strategies on Pendle to achieve higher yields, such as depositing USDe until July 25 to earn a fixed yield of about 32.14%, or purchasing YT USDe to receive higher Sats reward multipliers. MakerDAO voted to increase the debt ceiling of MetaMorpho Vault DDM to $1 billion, with an initial allocation of $600 million DAI to be distributed in the USDe and sUSDe markets. USDe is the only non-ETH or LST re-staking asset in zkEVM L2 Zircuit, and currently, $203 million of USDe is staked in the Zircuit: Restaking Pool. Curve offers various liquidity pools for stablecoins with USDe; IntoTheBlock data shows that there is over $76.2 million in liquidity for USDe on DEXs, with Curve accounting for $69.9 million.

Additionally, users can trade USDe on centralized exchanges such as Bybit, Bitget, and KuCoin, as well as participate in Ethena USDe earn points activities through exchange Web3 Wallets. For example, by locking USDe in the Ethena through wallets like Binance, Bybit, OKX, and Bitget, users can receive an additional 20% Sats bonus.

Earn more Sats with Pendle

Simply holding USDe or sUSDe can earn 5x Sats and 2x Sats daily respectively. Depositing USDe or sUSDe into Pendle to purchase YT or Zap In LP can yield 20x Sats daily.

Taking YT-sUSDe as an example, users can earn ten times more Sats daily compared to simply holding sUSDe, and YT-sUSDe will inherit the basis trading earnings captured by sUSDe (with an APY over 11%). However, it is important to note that the value of YT becomes zero at maturity. It can be sold at any time before its expiry at the current market price while retaining the earned Sats points.

Users may also choose a more stable way to earn points by Zapping In LP with sUSDe. For instance, if a user buys $100 worth of Pendle LP sUSDe, it would be split into 52.9677 LP sUSDe and 22.8851 YT sUSDe. The user can earn 20x Sats corresponding to the 22.8851 YT sUSDe and the basis trading APY from sUSDe, as well as the swap fees generated by the 52.9677 LP sUSDe. Moreover, by locking USDe or sUSDe for different durations, users can achieve various levels of maximum power boosts.

MakerDAO Partnership

Among these developments, the most surprising is MakerDAO. Maker has proposed and voted to agree to allocate up to $1 billion, initially $600 million DAI, to USDe and sUSDe, subsequently applying USDe and sUSDe in the Morpho lending market. Maker has attracted attention during the bear market by capturing real-world liquidity through the purchase of U.S. Treasury bonds, and entering the USDe and sUSDe markets appears to be a form of arbitrage between RWA, DeFi, and CeFi. Based on user preferences and risk considerations, Maker prioritizes allocations to the USDe Pool over sUSDe. From the user perspective, investors prefer holding USDe over sUSDe as it offers higher Ethena points and ENA token airdrops.

Additionally, based on demand trends and liquidity risk assessments, Maker’s allocations focus on 86% and 91.5% Liquidation LTV pools for Morpho USDe. As of May 8, these two Liquidation LTV USDe pools had more than $230 million in DAI supply, with an average borrow rate exceeding 20% over the past 24 hours; the largest sUSDe pool has a 91.5% Liquidation LTV with a total supply of $27.8 million DAI, and an average borrow rate of about 12.2% over the past 24 hours.

ENA Metrics and Valuation

It now seems generally accepted that a more reasonable way to invest in Ethena is to hold USDe or use USDe in combination strategies to earn more Sats points, thereby securing a higher future ENA airdrop allocation. However, ENA is not just a so-called governance token; it can also be staked to earn Sats points, with a higher coefficient multiplier compared to USDe. Moreover, if the value of ENA locked in Ethena is at least half of other positions, an additional 50% Sats bonus is earned in all categories (except ENA Sats). For example, if a user locks $500 in ENA and $1000 in USDe, then that $1000 in USDe would earn a 50% Sats bonus.

Given that points can be generated, this inevitably involves Pendle. Users can also speculate using ENA YT and ENA PT, where ENA YT can be treated as ENA and is eligible for the 50% additional Sats bonus. By reusing ENA, it can effectively reduce ENA’s circulation in the secondary market, thereby stabilizing its market price and enhancing its appeal as a long-term investment and store of value.

The total supply of ENA is 15 billion. As of May 8, the circulating supply of ENA is 1.425 billion, which is approximately 9.5% of the total supply; calculated at the current price of $0.85, the ENA FDV is $12.75 billion, and the MC is $1.21 billion. The current Ethena TVL, which is the total amount of USDe, is $2.36 billion.

For a protocol that generates real earnings, a valuation model similar to the traditional PE ratio is a good indicator for evaluation.

The P/S Ratio is the ratio of FDV or MC to annualized revenue. For Ethena, this annualized revenue includes the earnings distributed to sUSDe holders.

The Ethena P/S (MC) ratio is 5.74x, which is the lowest among all stablecoin issuers that have launched tokens; the P/S (FDV) ratio is 58.2x, below average compared to other crypto stablecoin issuers.


The core of Ethena originates from basis trading, which has been validated and feasible. Many large institutions and whales are benefiting from this strategy, and USDe provides an entry point for retail investors. The profit points and risk points of basis trading are very clear, and the teamexplicitly emphasizes the potential risks faced. This contrasts sharply with the vague profit models and ambiguous risk warnings typical of most protocols in the crypto space. USDe is also committed to expanding more use cases, and its adoption rate is continuously growing. Beyond simple staking or holding, users can implement more complex earning strategies through DeFi protocols such as Pendle, Zircuit, and Morpho. For those looking to exit, Curve DEX and centralized exchanges such as Binance and Bybit provide good liquidity support.

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