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The current excitement surrounding stablecoins is highlighted by Ethena (USDe), which has caught the attention of Bitwise President Teddy Fusaro.
In a Twitter thread dated April 10, Fusaro discussed the protocol’s features, stating that USDe “might be the fastest-growing USD-denominated asset in the history of crypto.”
Bitwise Analyzes Ethena (USDe)
“USDe functions quite similarly to an ETF,” he remarked.
Bitwise manages numerous crypto funds, including a newly popular Bitcoin spot ETF, although it does not have any investments in Ethena.
On Amtrak to Boston. Had a moment to examine Ethena & USDe which may be the fastest-growing USD-denominated asset in the history of crypto.
I’m sharing insights on structure/mechanics here as I personally understand it. Not a Bitwise or personal investment. https://t.co/xNQHvyIBZd
— Teddy Fusaro (@teddyfuse) April 10, 2024
“There’s a ‘fund’ (protocol) that accepts contributions from ‘APs’ & subsequently issues ‘units’ (or USDe tokens),” Fusaro elaborated. “The protocol then allocates investments into a predetermined portfolio.”
Ethena’s portfolio primarily comprises four assets: Bitcoin (BTC), Ethereum (ETH), ETH liquid staking tokens, and Tether USDT. These reserves are balanced by equally weighted short perpetual futures exposure, resulting in a “delta neutral” portfolio that preserves the same dollar-denominated value over time.
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However, there is a caveat: The reserves yield returns through their staked ETH and futures interest—and this yield is distributed to all USDe holders. Additionally, holders can stake their USDe to receive sUSDe and earn even greater yield.
“At scale, this interest can be substantial,” Fusaro noted. “It represents a massive total addressable market.”
USDe Compared to Other Stablecoins
In contrast, conventional stablecoins like USDT and USDC are supported by centralized reserves mainly made up of cash and U.S. Treasury bills. The T-bills generate significant profits, but the companies behind them retain all earnings and do not share them with stablecoin holders.
USDe, like any other asset, carries distinct risks. Fusaro pointed out that these include exchange counterparty risk, exchange hacking risk, smart contract risk, and the possibility of negative futures funding.
Nonetheless, if the stablecoin faces any depegs or drastic unwinds, Fusaro asserts it will not occur in the same manner as the Terra protocol’s TerraUSD stablecoin did in May 2022. TerraUSD fell into a downward spiral alongside the LUNA token due to internal algorithms that led to the latter token’s supply hyperinflation.
“Is [USDe] going to succeed? Honestly, I do not know,” Fusaro expressed. “But the rapid growth and immediate success are remarkable, and the support they have is evidently significant.”
USDe currently has a market capitalization of $2.36 billion, up from less than $1 billion just one month prior. According to Stablecoin Stats, this positions it as the fourth-largest stablecoin in circulation.
The post Bitwise President Explains Why He’s Curious About Ethena appeared first on Cryptonews.
