Inside Ethena and the USDe Stablecoin Yield Model

Ethena Labs’ USDe is not fully backed by U.S. dollar deposits. Instead, it uses crypto assets such as staked ETH as collateral and takes equivalent short positions in derivatives markets, employing a delta-neutral strategy to reduce price volatility. Yield comes primarily from staking rewards and perpetual-contract funding rates, but the model remains exposed to exchange, custody, liquidation and negative funding-rate risks.

USDe became publicly available in February 2024, and its circulating supply surpassed $3 billion on June 2 that year, making it one of the largest U.S. dollar stablecoins in about four months. Ethena passes strategy-generated yield to users who stake USDe, but returns are not fixed. A key question is whether its reserve fund and hedging positions can withstand pressure across market cycles if funding rates remain negative for an extended period.