Ethena Founder Analyzes the Mystery Behind the Rapid Rise of the Stablecoin USD

Recently, the market value of Ethena's USDe stablecoin soared from 140 million USD to 7.2 billion USD within a year, increasing more than 50 times. Ethena founder Guy Young was interviewed to reveal the reasons behind the company's rapid rise and his views on the market landscape.

Young stated that Ethena has identified the huge demand for crypto assets in traditional markets and the liquidity issues facing the crypto market. Their goal is to attract a broader base of investors rather than pursuing short-term high premiums on assets.

The total scale of the USDe project is approximately 360 million USD, of which 260 million is cash. The funds raised by Ethena account for about 8% of the circulating market value and will be used to purchase tokens in the open market. Young emphasized that relative to the scale of the underlying assets, this project is quite large, and the raised cash will have a significant impact on the tokens.

Speaking about stablecoin strategies, Young stated that Ethena focuses on savings use cases. The average annualized yield of USDe in 2024 reaches 18%, which is four times the interest income of some competitors. Adjusted for yield, Ethena's asset scale has become comparable to that of some giants.

Young explained the core strategy of Ethena for generating returns: basis trading through a combination of spot long and futures short. He provided financing for long positions in centralized finance ( CeFi ) with USDe as the focus.

Regarding market dynamics, Young pointed out that there are significant differences in the capital pools between traditional financial markets like CME and the cryptocurrency market. Although the basis may compress over time, Ethena aims to become a more effective channel for institutional capital inflow into the crypto market.

Talking about the "Genius Act", Young revealed that Ethena is collaborating with the U.S. federal crypto bank Anchorage to launch a USDtb that complies with the act. He believes that offshore markets are still the most vibrant operating venues.

Young takes a cautious attitude towards the future of the stablecoin market. He believes that new entrants will find it difficult to compete with existing giants, as stablecoin products are highly commoditized, making it challenging for startups to achieve differentiation.

Young holds a cautiously optimistic view on the prospects of the cryptocurrency market. He believes that as long as related financial instruments trade at a high premium, the market will not decline. However, he warns that if the rollout of new instruments slows down, it could be a turning point for the market.

Finally, Young predicts that Ethena has the potential to capture 20-25% of the derivatives market, with a scale of 20 billion to 30 billion USD. He also pointed out that if the valuation of Layer 1 public chains declines, the products relying on them will also be affected.