Ethena Reserve into Bitcoin! It is said that USDe’s current scale of 2 billion can be expanded by 2.5 times.
Ethena, the synthetic U.S. dollar stablecoin protocol, announced yesterday (4th) that it will include Bitcoin as a reserve asset of USDe to cope with the unprecedented growth since the launch of USDe. As the size of USDe expands, the existing open interest on Ethereum may no longer be enough to meet Ethena's hedging needs. After the introduction of Bitcoin, Ethena claims that the potential size of USDe can be expanded by more than 2.5 times.
Ethena, a synthetic U.S. dollar stablecoin protocol, issues U.S. dollar stablecoin USDe with its "Delta-neutral" mechanism. Originally, the composition behind this mechanism was based on equivalent spot ETH and ETH futures short positions, and the two were hedged to become a "Delta-neutral" ” stable assets. Yesterday (4th), in view of the unprecedented growth of USDe, with its current market value exceeding US$2 billion, Ethena officially announced that Bitcoin would be included as a reserve asset of USDe to support the further expansion of USDe’s scale.
Reasons for including Bitcoin
Ethena noted that hedging transactions conducted by Ethena have so far accounted for one-fifth of the value of all Ethereum open interest (OI) currently on the market. As the size of USDe continues to expand, the existing open interest volume of Ethereum in the market may not be sufficient for Ethena to conduct sufficient hedging operations. Therefore, the introduction of Bitcoin as a reserve asset has become a crucial decision. Ethena stated that there is $25 billion in Bitcoin open interest available for delta hedging by Ethena, allowing the potential size of USDe to expand by more than 2.5 times.
Over the past year, Bitcoin’s open interest on major exchanges (excluding CME) has surged 150% to $25 billion, while Ethereum’s growth rate has been 100%, with open interest reaching 100 One hundred million U.S. dollars. In this regard, Ethena said: The rapid growth of the Bitcoin derivatives market has surpassed that of Ethereum, providing better scalability and liquidity for delta hedging transactions.
In addition, Ethena also mentioned that compared to Ethereum’s liquidity pledged tokens, Bitcoin has greater advantages in liquidity and maturity characteristics.
Will Bitcoin’s lack of staking income affect USDe APY?
Originally, USDe's income mainly came from "Ethereum PoS pledge income" and "funding rate for holding short contract positions". However, since Bitcoin does not have the same native staking returns as staking ETH, this change may have an impact on USDe's returns. However, Ethena pointed out that during the bull market, when the funding rate exceeds 30%, the staking income of 3~4% actually has a limited impact, and the current market conditions are extremely suitable to increase the scale and scalability of USDe.
According to Ethena's statistics, Bitcoin's funding rate will be comparable to Ethereum in 2021, but in the bear market in 2022, Bitcoin's funding rate gains will exceed those of Ethereum, at 2% and 0% respectively. During bull markets, Ethereum’s funding rate often exceeds that of Bitcoin.
Currently, users can view USDe’s mortgage asset portfolio through Ethena’s official website. Although it has not yet been shown that Bitcoin has been included, the mortgage assets include USDT worth $736 million and ETH worth $870 million, respectively accounting for the total of all USDe’s mortgage assets. 38% and 44% of the value.
