The stablecoin Ethena (USDe) is currently experiencing a surge in popularity within the crypto community, catching the attention of Bitwise President Teddy Fusaro. Fusaro recently reviewed the protocol and noted that USDe may be the fastest-growing USD-denominated asset in the history of crypto. The protocol operates similarly to an ETF, with contributions from Authorized Participants (APs) used to issue USDe tokens, which are then invested in a pre-determined portfolio. This portfolio consists of Bitcoin, Ethereum, ETH liquid staking tokens, and Tether USDT, along with short perpetual futures exposure to create a delta neutral portfolio that maintains a constant dollar-denominated value over time.
In contrast to traditional stablecoins like USDT and USDC, which are backed by centralized reserves of cash and U.S. Treasury bills that do not distribute profits to stablecoin holders, USDe generates yield through its reserves. This yield is paid out to all holders of USDe, and holders can stake their USDe to receive even more yield in the form of sUSDe. Fusaro highlighted that the interest generated by USDe at scale could be significant, creating a potentially massive total addressable market. However, he also pointed out unique risks associated with USDe, such as exchange counterparty risk, exchange hacking risk, smart contract risk, and the risk of negative futures funding.
Despite the risks involved, Fusaro expressed optimism that USDe’s success may differ from other stablecoins that experienced depegs or radical unwinds in the past. He referenced the collapse of TerraUSD stablecoin in May 2022, which led to a downward spiral alongside the network’s LUNA token due to internal algorithm issues. While Fusaro admitted uncertainty about the ultimate success of USDe, he acknowledged the rapid growth and significant support the stablecoin has garnered within the crypto community. Currently, USDe boasts a market cap of $2.36 billion, a significant increase from less than $1 billion just one month ago. According to Stablecoin Stats, this would make USDe the fourth-largest stablecoin in circulation.
In conclusion, the rise of Ethena (USDe) as a rapidly growing stablecoin within the crypto space has attracted attention from industry experts like Bitwise President Teddy Fusaro. The protocol’s unique mechanics, which generate yield for stablecoin holders through a diversified portfolio and staking opportunities, have contributed to its rapid growth and success. While USDe carries its own set of risks, including exchange counterparty risk and smart contract vulnerabilities, Fusaro acknowledges the potential for significant interest generation on a large scale. With a substantial market cap and growing community support, USDe has emerged as a formidable player among stablecoins, positioning itself as a key player in the volatile world of crypto assets.
