The Ethena platform accounts for 5% of global open interest in Ethereum perpetual futures

Positions on Ethena, the protocol behind USDe, currently account for more than 5% of global open interest in Ethereum perpetual futures. USDe is a token that is pegged to the value of the U.S. dollar and offers high yields. Although it is described as a stablecoin, the team avoids using the term and instead explains it as a “synthetic dollar.” George Calle, vice president of research at The Block, emphasized that Ethena’s USDe is essentially a tokenized form of cash buy and sell arbitrage in the crypto market. Therefore, it generates revenue by shorting Ethereum futures and staking Ethereum. The project’s advertised annualized yield of up to 27% has attracted users to mint approximately $420 million in USDe tokens to date, according to CoinGecko. This growing market share of Ethena has raised concerns that the protocol’s yields could drop significantly as market share increases. However, Ethena founder Guy Young, who goes by the pseudonym Leptokurtic, said he is not worried about the current situation, but that the protocol may face difficulties with higher market share. Young said that if USDe’s yield fell significantly, a self-correction mechanism would come into play. He explained that in this case, market participants would opt out of staking their USDe. If they do, this will bring funding rates back to a new equilibrium. A more worrying scenario, he added, is if the protocol accounts for around 30% to 40% of open interest in Ethereum perpetual futures, “that’s when products like Ethena start to face more severe capacity constraints.” Calle noted that Ethena’s design may put downward pressure on funding rates, but this does not raise solvency or systemic risk issues. Instead, it raises the question of how much funding the protocol can absorb before returns shrink to levels that are unattractive to token holders. (The Block) According to previous news, the decentralized stablecoin project Ethena Labs announced the opening of a new USDe deposit pool, with an initial limit of $50 million, which was later increased to $100 million, and the deposit limit was quickly reached again.