GuShiio.com Ethena’s currency price is under pressure in the short and medium term, and the core business of the project has long-term value.
Author: 0xCousin
1. Who is behind Ethena?
Ethena’s team members
Ethena team members have rich backgrounds and have deep professional knowledge and practical experience in fields such as Crypto, finance and technology.
Founder G (Guy Young) worked in a $60 billion hedge fund and founded Ethena after Luna collapsed;COO Elliot Parker was previously a product manager at Paradigm and also worked at Deribit; Jane Liu, head of institutional growth in the Asia Pacific region, has served as head of investment research at Fundamental Labs and head of institutional partnerships and fund relations at Lido Finance.
Ethena’s financing situation
According to Rootdata, Ethena has conducted three rounds of financing, with a cumulative financing amount of US$119.5 million. Leading investors mainly include Dragonfly, Maelstrom Capital, and Brevan Howard Digital.
Ethena has attracted the attention and investment of many well-known investment institutions,It not only brings considerable funds to Ethena’s development, but also provides valuable industry resources for Ethena’s business development.。Ethena’s investment arm coversexchange(YZi Labs, OKX Ventures, HTX Ventures, Kraken Ventures, Gemini Frontier Fund, Deribit, etc.),market makers(GSR, Wintermute, Galaxy Digital, Amber Group, etc.),traditional financialInvestment institutions with background (Paypal Ventures, Franklin Templeton, F-Prime Capital, etc.)
2. What is Ethena?
To sum it up, Ethena is a Synthetic Dollar protocol that launches the U.S. dollar stablecoin USDe and the U.S. dollar savings asset sUSDe.The stability of USDe is supported by crypto assets and corresponding Delta-neutral hedged (short futures) positions.
From the perspective of the project mission, Ethena aims to connect funds in the three fields of CeFi, DeFi, and TradFi through the stablecoin USDe. At the same time, Ethena captures the fund interest rate difference in these three fields (exchanges, on-chain, and traditional finance)., thereby providing customers with more benefits. If USDe develops to large enough, it may also promote the convergence of capital and interest rates among DeFi, CeFi, and TradFi.
Mechanism of the stablecoin USDe
Foundry/redemption mechanism: USDe minting/redemption Only two independent legal coiners on the white list (Ethena GmbH, Ethena BVI Limited) are eligible to minting and redemption. Miners need to use BTC/ETH/ETH LSTs/ USDT/USDC as collateral to interact with the USDe Mint and Redeem Contract. As shown below:
The first USDe cast of the Ethena Agreement USDe Mint and Redeem Contract V1
A recent USDe casting based on the Ethena agreement USDe Mint and Redeem Contract V2
This is a record of USDe redeeming USDT
At the time of casting/redemption, the pricing of Backing Assets is obtained and continuously verified from multiple different sources, including CeFi Exchange, DeFi Exchange, OTC Markets, and Oracle such as Pyth and RedStone, to ensure that the pricing is correct and reasonable.
USDe stability maintenance mechanism: To ensure the stability of USDe, the key is to hedge the price fluctuations of Backing Assets. Ethena adopts a Delta-neutral strategy that implements automation and proceduralization.
sUSDe’s revenue sources
sUSDe’s income comes from Ethena’s disposal of collateral.
-
When Ethena receives collateral, it can hold it as a stable currency and earn a fixed deposit interest rate;
-
You can also entrust it to the selected CEX by the custodian to set up airdrop futures positions in the CEX to hedge the price fluctuations of Backing Assets and earn capital rates at the same time;
-
If Backing Assets spot is ETH, you can also perform Staking to earn ETH Staking APR.
These proceeds will be distributed to users in the form of returning more USDe to users when users cancel their pledge of sUSDe and redeem USDe.
Purpose of stablecoins (USDe/sUSDe/iUSDe)
In the DeFi space:
-
USDe/sUSDe serves as collateral for loan agreement platforms such as AAVE and Spark;
-
USDe/sUSDe serves as margin collateral for platforms such as Perps DEX;
-
USDe/sUSDe as collateral for the Stablecoin Agreement;
-
USDe/sUSDe as the underlying asset of the interest rate swap agreement;
-
USDe serves as the pricing currency in Spot DEX (forming a trading pair);
In the CeFi field:
-
USDe serves as the pricing currency in CEXs (forming a trading pair);
In the TradFi field:
-
iUSDe is Ethena’s stablecoin for the TradFi market, allowing regulated traditional companies to subscribe, allowing these traditional investment institutions to provide high yields in the Crypto market to traditional customers without having access to Crypto.
3. Ethena’s innovation points
Delta-neutral strategy hedges price fluctuations of Backing Assets
Many stablecoin projects that use Crypto Assets as Backing Assets ultimately become insolvent and lead to exchange rate decoupling. The key is that the price fluctuations of Backing Assets are not hedged out. Ethena is the first project to perform automated, programmatic delta-neutral hedging on Backing Assets using the Delta-Hedging algorithm and execution model, bringing the portfolio’s Delta value close to 0. Although the early Delta-Hedging algorithm and execution model of Ethena was a black box, whether delta-neutral results could be achieved in the long term was a potential risk point, and this stability maintenance mechanism was an innovation. In the later period, it may shift to an open RFC model, when various market makers can intervene in competition to perform hedging tasks.
Under normal circumstances, when USDe is redeemed, it is redeemed based on the benchmark of 1 USDe = 1 USDC; if the hedging mechanism does not work, or the capital rate of hedging futures positions suffers a loss, the value of the asset reserve will decrease. Then the USDe holder’s offer at the time of redemption will include a corresponding reduction to reflect a proportional reduction in the redemption price, and the offer displayed to the user will include a compensation fee of 10 basis points.
Much higher than the capital efficiency of most stablecoin projects
Centralized stablecoins, such as USDT and USDC, are greatly influenced by traditional financial supervision. Moreover, the mortgaged assets are mainly legal currencies, mainly based on buying U.S. Treasury bonds and savings. They also have centralized single point risks and low capital efficiency.
Decentralized stablecoins, such as MakerDAO’s DAI, generally require 120%-150% over-collateralization. If we consider avoiding the margin of safety of being cleared, the actual mortgage rate may exceed 200%, which is relatively low in capital efficiency and is extremely volatile in the market. When the customer’s mortgage assets are cleared, additional liquidation losses will be caused.
Ethena’s USDe, in terms of asset mortgage ratio, has approached 1 USD: 1 USDe, and is supplemented by a Delta-neutral strategy to hedge price fluctuations. The capital efficiency is high and stability is guaranteed.
More importantly, Ethena’s positioning allows other projects on the stablecoin track to become Ethena’s partners. For example, Sky, Frax, and Usual have all combined/integrated Ethena’s products in their own products.
OES custody model ensures asset security
Ethena currently works with multiple custodians, including Copper, Ceffu, and Cobo. The cooperation adopts the OES (Off-Exchange Settlement) model. In this model, backing assets do not need to leave the chain wallet, so there is no need to worry about the risks of CEX; there is also no need to worry about the risks of the custodian, because the custodian cannot independently control these custody assets. For example, when the custodian is Cooper, these backing assets are stored in an off-site vault. Ethena, Cooper, and off-site vault each hold a key and require signatures from both parties to execute the transaction; or they are stored in a bankruptcy remote trust.
Integrate traditional finance and make USDe bigger and stronger
Ethena connects funds in the three fields of CeFi, DeFi, and TradFi through the stablecoin USDe. By capturing the difference in fund interest rates in these three fields (exchanges, on-chain, and traditional finance), it can bring higher returns to customers.
There are generally not many high-yield products in TradFi, but the low-yield fixed-income market is very large. In the Crypto field, users ‘demand for leveraged trading has brought more demand for currencies (U.S. dollar stablecoins), which often provides risk-free high-yield opportunities in the Crypto industry.
Ethena serves as a bridge to integrate traditional finance and make USDe bigger and stronger. When the Federal Reserve’s interest rate is low (or interest rate cut cycles), Crypto’s trading will be more active, and perpetual contract funding rates in the Crypto market will be higher. Erena’s short futures positions for Delta hedging can earn more funding rates. As a result, there is a phenomenon that when the yield of traditional finance is very low, customers can obtain higher yields through Ethena.
Therefore, iUSDe can meet the asset allocation needs of traditional financial customers during periods of low interest rates. This may be part of the reason why Franklin Templeton and F-Prime Capital, a venture capital arm of Fidelity Investments, invested $100 million in Ethena’s strategic round last December. In addition, the USDtb launched by Ethena in partnership with BlackRock BUIDL may also drive a large amount of money from TradFi to Ethena and then to the Crypto market.
4. Project development status
Ethena’s USDe has become the third largest dollar stablecoin.As of March 7, 2025, USDe’s circulation has reached US$5.5 billion +, second only to USDT and USDC. Transfer Volume ranks fourth, behind USDT, USDC, and DAI. However, the number of Active Addresses is small, only 1612, and the C-side application scenarios need to be expanded. Ethena’s revenue is also growing rapidly, ranking second only to Pump.fun for a cryptocurrency startup with revenue of US$100 million.
Ethena has become a key cornerstone of many DeFi protocols.More than 50% of Pendle’s TVL is attributed to Ethena; approximately 25% of Sky’s revenue is attributed to Ethena; approximately 30% of Morpho’s TVL’s revenue comes from leveraging Ethena assets;Ethena is the fastest-growing new asset on Aave; most EVM-based Perps integrate USDe collateral;
Ethena is building an ecosystem around USDe.According to public information on Ethena’s official website, two project decentralized trading platforms Ethereal and online trading protocol Derive will be launched in Q1 of 2025 (supporting options, perpetual and spot trading). Ethena has also made steady progress in external cooperation, cooperating with BlackRock to launch USDtb and reaching a cooperation with the Trump family’s DeFi project World Liberty Financial.
Ethena also has some risk points:
USDe’s core earnings are unstable——As mentioned earlier, USDe has three major sources of income, one is the deposit interest rate income of Backing Stablecoin, the other is the capital rate income of short futures positions, and the third is the pledge income of ETH in Backing Assets. Among them, the capital fee for futures positions may continue to have negative capital rates in a bear market, resulting in a deficit in USDe earnings.
CEX’s ADL mechanism may cause Delta neutrality strategy to fail——Because CEX has an automatic deleveraging (ADL) mechanism, it may affect Ethena’s Delta-neutral strategy in a specific period of time.
Partners may pose liquidity risks——Bybit has the highest USDe adoption rate, holding nearly 700 million USDe at its peak. At the same time, Layer2 Mantle, which is closely related to Bybit (the BitDAO founded by Bybit’s co-founder merged with the Mantle ecosystem), is the second-largest chain in USDe supply. This time Bybit was hacked and stolen money, which triggered more than US$120 million in USDe redemption demand. Ethena currently has US$1.9 billion in Backing Assets that are Liquid Stables, so it is enough to cover these suddenly increased redemption demand. However, it cannot be ruled out that there may be a huge amount of concentrated redemptions exceeding its Liquid Stables reserves in the future, which will bring short-term liquidity risks.
5. Investment Value of Ethena (ENA)
ENA currently has an FDV of 5.6B and a circulating market value of 2B. Ethena has carried out three rounds of financing, with financing amounts of 6M, 14M, and 100M respectively. The second round is valued at US$300 million. The current currency price is still 18 times + income.
Before May 5, 2025, the Tokens in circulation are mainly 2% Binance Launchpool, and in addition, foundation and team shares are in the process of linear unlocking. In April, some OTC purchases will begin to be unlocked, with a cost price of approximately 0.25U; starting from May 5, the shares of investment institutions will be increased linearly to 7800w +ENA/month each month.
The overall Crypto market has recently corrected, and ENA has performed very weak.BTC has retreated 25% from its high, ETH has retreated 50% from its high, and ENA has retreated about 70% from its high. The above-mentioned negative situation that ENA Token is about to be unlocked may have been fully reflected in the current currency price.
Taken together,Ethena’s currency price is under pressure in the short and medium term, and the core business of the project has long-term value.
Welcome to join the official social community of Shenchao TechFlow
Telegram subscription group: www.gushiio.com/TechFlowDaily
Official Twitter account: www.gushiio.com/TechFlowPost
Twitter英文账号：https://www.gushiio.com/DeFlow_Intern
