DeFi Rides the Ethena Wave

Synthetic Dollar Surge. Ethena’s assets are being rapidly adopted across crypto! Why are protocols desperate to incorporate USDe, and what impacts have integrations had on token price?

Given the extremely high yields that Ethena’s assets are generating, with sUSDe earning best-in-class returns for a stablecoin from funding/staking payments and USDe throwing off tremendous airdrop rewards, demand for the various types of financial products that can be synthesized from these assets is high, and users are willing to pay a premium to obtain them!

The Total Value Locked (TVL) on Pendle has increased by $800 million in the past week, with over 40% of the increase attributable to USDe.

Pendle has been an instrumental in facilitating airdrop speculation on Ethena, with those who hold the Protocol’s yield tokens (YTs) on USDe purchasing pure exposure to the points generated from the token in exchange for a fixed payment, a strategy currently yielding 135 Sats per dollar of capital deployed per day with just one click.

Given the massive amount of demonstrated demand for this service, the potential for further deposit expansion is merely contingent on the willingness of Pendle to raise caps.

Glomming onto Pendle’s success is Mantle, who recently received its own deployment of the Protocol, which ballooned to $130M in TVL on its first day and now holds $160M in deposits.

To make itself the premier destination for USDe points speculation through Pendle, Mantle is offering users on its chain who trade USDe YTs and PTs or provide liquidity with a bonus 0.0012 EigenLayer points per USDe per day and 13.8M points up for grabs!

MakerDAO is also riding the Ethena wave, minting DAI against USDe and sUSDe collateral through Morpho. While just 2% of circulating DAI is collateralized by these Ethena lending operations, the loans are earning a 66% annualized return and contributing 16% towards Maker’s expected revenues.

This facility is expected to expand to $600M in the immediate future, with the potential to increase the line to $1B, a move which will allow Maker to further increase revenues.

Gearbox is yet another protocol allowing the degens to speculate on Ethena assets, allowing them to borrow stablecoins to generate leveraged positions on USDe and sUSDe.

While the Protocol doubled borrow capacity against USDe yesterday, increasing it from $50M to $100M, these limits were expediently reached, indicating that Gearbox can expect to continue to grow deposits and revenues as long as they are willing to increase caps.

 Despite mounting concerns about Ethena’s stability over the longer term, integrating its assets appears to be a winning formula for the moment.

Compared to the 2.5% decline in the total crypto market cap over the past week, the tokens of protocols listed above are posting double digit gains, with user interest in Ethena products showing no signs of slowing down!

Financializing synthetic dollar stablecoins to facilitate point speculation certainly comes with inherent risks. However, projects embracing them are likely to see further gains as deposits continue to increase.