Ethena and Tether's Symbiotic Growth in the Crypto Market

According to PANews, Ethena founder Guy Young clarified on the X platform that Ethena and Tether are not competitors but rather mutually beneficial entities. In a market where approximately 70% of perpetual contracts are denominated in USDT, each short position added by Ethena creates new demand for USDT. This is because the counterparty must use USDT as collateral to establish long positions. This mechanism implies that for every dollar of USDe issued, supported by perpetual contracts, there is an approximate $0.7 increase in demand for USDT. Young emphasized that Tether does not need to launch its own yield products, as traders are already using USDT as collateral, paying annualized interest rates of 10% to 30% to go long on perpetual contracts. Ethena serves as a channel to convert this demand. The behavior of crypto market users is extreme, either seeking maximum liquidity or the highest returns. As interest rates decline, the middle ground, characterized by low liquidity but marketed as risk-free returns, will be eliminated. The trading sector needs to offer more liquidity and distribution advantages than Tether, while the savings sector must provide higher returns than Ethena, making the middle path difficult to succeed. Young believes that the 'barbell strategy' formed by Tether and Ethena represents the ultimate form of industry development.