Bitwise President Explains Why He’s Curious About Ethena

by Margarita Armstrong

The most up-to-date stablecoin hype prepare is underway in the construct of Ethena (USDe), and Bitwise President Teddy Fusaro is taking an passion.

In an April 10 Twitter thread reviewing the protocol’s mechanics, Fusaro renowned that USDe “may perhaps perhaps be the quickest-rising USD-denominated asset in the history of crypto.”

Bitwise Examines Ethena (USDe)

“USDe operates v in the same style to an ETF,” he wrote.

Bitwise itself owns many crypto funds, including a contemporary and unique Bitcoin space ETF, though it has no investments in Ethena.

On Amtrak to Boston. Had a min to judge about at Ethena & USDe which may perhaps perhaps be the quickest-rising USD-denominated asset in the history of crypto.

I’m tweeting about structure/mechanics here as I in my thought comprehend it. No longer a Bitwise or private funding.

— Teddy Fusaro (@teddyfuse) April 10, 2024

“There’s a ‘fund’ (protocol) that accepts contributions from ‘APs’ & then components ‘items’ (or USDe tokens),” Fusaro persevered. “The protocol then invests in a pre-obvious portfolio.”

Ethena’s portfolio primarily includes 4 sources: Bitcoin (BTC), Ethereum (ETH), ETH liquid staking tokens, and Tether USDT. Those reserves are counterbalanced by equally weighted quick perpetual futures publicity, making a “delta impartial” portfolio that maintains the identical dollar-denominated cost over time.

But there’s a rep: The reserves generate yield via their staked ETH and futures passion—and that yield is paid out to all holders of USDe. Then, holders can stake their USDe themselves to rep sUSDe and rep rather more yield.

“At scale, this passion may perhaps even be massive.” Fusaro wrote. “It is a monumental total addressable market.”

USDe Versus Other Stablecoins

By comparability, feeble stablecoins esteem USDT and USDC are backed by centralized reserves primarily consisting of money and U.S. Treasury bills. The T-bills form a hefty profit, but the agencies backing them fully preserve their good points and own no longer distribute them to stablecoin holders.

USDe aloof carries irregular dangers esteem some other asset, then once more. In accordance to Fusaro, these consist of exchange counterparty threat, exchange hacking threat, natty contract threat, and the threat that futures funding will chase negative.

On the other hand, if the stablecoin experiences any depegs or radical unwinds, Fusaro says it won’t be in the identical style because the Terra protocol’s TerraUSD stablecoin in Might perhaps perhaps also 2022. TerraUSD collapsed in a downward spiral alongside the network’s LUNA token attributable to internal algorithms that introduced about the latter token’s provide to hyperinflate.

“Is [USDe] going to work? In spite of every thing, I own no longer know,” wrote Fusaro. “But the rapid command and instantaneous success are wild and the help that they’ve is clearly main.”

USDe now boasts a $2.36 billion market cap, compared to no longer up to $1 billion precisely one month in the past. In accordance to Stablecoin Stats, this may perhaps perhaps develop it the fourth-largest stablecoin in circulation.

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