Since its January launch, the platform has earned from shorting ether (ETH) futures and pocketing financing rates. Ethena's USDe should always be $1. Over $2 billion in USDe has been issued since its debut, and demand is rising.
Ethena Labs will initiate a cash-and-carry exchange of bitcoin {{BTC}}, resulting in a “safer” USDe synthetic dollar product for customers. Since January, the contentious site has generated an annual yield of 37% (a seven-day rolling average, subject to change) by shorting ether {{ETH}} futures and pocketing funding rates.
Long or short traders receive funding rates based on the difference between perpetual contract markets and spot pricing. Demand for USDe, its synthetic dollar, has grown to over $2 billion since its release, despite critics. USDe, like a stablecoin but with a different backing mechanism, maintains a $1 peg.
Developers think adding bitcoin will increase user yields and USDe issuance. In an X post, Ethena devs said that hedges now account for ~20% of ETH open interest, following the exceptional USDe rise since debut. “With $25bn of BTC open interest for Ethena to delta hedge, USDe can scale >2.5x.”
BTC derivative markets are faster-growing than ETH and more scalable and liquid. They said that Ethena's backing strengthens when it approaches $10bn, making the solution safer for users.
Tether (USDT), frax (FRAX), dai (DAI), Curve USD (crvUSD), and mkUSD can be deposited on Ethena to receive USDe, which can be staked. Unstaking takes 7 days. Supplying staked USDe tokens to other DeFi platforms might boost yield.
Traders take a long position in an asset and sell the derivative in a futures mechanism akin to a "cash and carry" strategy. In theory, such a trade is directionally neutral and profits from payouts rather than asset price movement.
How it works: First, someone mints USDe with $10 million tether. Ethena trades USDT for BTC. There is another way to steady USDe's value because bitcoin's value fluctuates.
Ethena shorts or bets $10 million in BTC perpetual futures contracts again. BTC's worth stays unchanged if its price drops 20% because the short position in BTC perps offsets the losses from owning BTC. Holding and shorting BTC creates USDe. Additionally, shorting BTC generates a funding yield for users.
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