Ethena Founder Reveals the Rise of Stablecoins

Recently, the market value of the USDe stablecoin skyrocketed from $140 million to $7.2 billion, more than a 50-fold increase. Ethena Labs has partnered with a federal regulatory bank to launch the first compliant stablecoin USDtb and has raised $360 million through StableCoinX, planning to list on Nasdaq.

Guy Young, the founder of Ethena, recently gave an interview where he shared the reasons behind the company's rapid rise and his views on the market landscape.

USDe Assets Enter the Treasury Market

Guy Young stated that Ethena has been preparing to enter the government bond sector since the beginning of this year. He believes that the demand for such themes in the traditional market far exceeds the supply, with a large amount of capital eager to invest. From a macro perspective, there has been a bottleneck in the capital flow of altcoins in the cryptocurrency market over the past 18 months; the industry needs to mature in order to break through a market cap of $1.2 trillion and must attract equity market investors who can handle large-scale funds.

USDe Asset Fundraising Details

The total scale of the project is approximately $360 million, of which $260 million is cash. Ethena's cash proportion is much higher than that of similar projects, aiming to introduce new cash to solve liquidity issues. The raised funds account for about 8% of the circulating market value and will be used for the public market purchase of coins, which is very prominent in the market.

Ethena's Competitive Advantages

Ethena focuses on savings use cases, offering dollar assets with structurally higher returns. In 2024, the average annualized yield of USDe reaches 18%, which is four times the interest income of a certain competitor. Adjusted for returns, Ethena's asset scale is equivalent to $28 billion.

Guy Young believes that Tether is a partner rather than a competitor. Ethena has productized the basis capture use case of Tether in centralized finance, creating a new product that can be seen as Tether's "yield version".

Ethena's Yield Generation Strategy

The core strategy is cash arbitrage or basis trading: going long on spot while shorting futures or perpetual contracts. Ethena profits by capturing the speculative premium in the derivatives market.

Views on the stablecoin market

Guy Young is pessimistic about new issuers entering the market and competing with existing giants. He believes that stablecoin products are highly commoditized, making it difficult for startups to differentiate themselves from established players. Stablecoins need to meet three conditions: they must be US dollars, have high liquidity, and offer returns. He holds a negative view of the unit economics and business models of stablecoin issuers, arguing that a scale of 100 billion US dollars is needed for the business model to be an attractive investment project.

Outlook on the Cryptocurrency Market

In the long term, Guy Young remains very bearish on ETH and other Layer 1s. He believes that BTC's dominance should reach 90%, and the valuation of other L1s should drop to one-tenth of what it is now, with a few equity-like businesses standing out.

The Market Potential of Ethena

Guy Young believes the market potential is immense. Currently, the open interest is around 110 billion to 120 billion USD, with yields of 15-20%. He believes Ethena should account for 20-25% of the derivatives market, which is 20 billion to 30 billion USD, assuming the market does not grow significantly. If traditional financial institutions are involved, the scale could be even larger, and interest rates might compress to 10-12%.