Interview with Ethena Founder: USDe Rises to Top Three, $260 Million Buyback Launched, Where is ENA Heading Amid the Hype?
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Interview with Ethena Founder: USDe Rises to Top Three, $260 Million Buyback Launched, Where is ENA Heading Amid the Hype?
Guy Young reveals the reasons behind Ethena's rapid rise in the stablecoin sector and shares his views on the current market landscape.
Navigating Web3 tides with focused insightsWritten by: Empire
Translated by: Baihua Blockchain
Recently, Ethena's (ENA) USDe stablecoin has gone viral, surging from a market cap of $140 million to $7.2 billion within a year—an increase of over 50x. Following the passage of the GENIUS Act, Ethena Labs swiftly partnered with Anchorage Digital, a U.S. federal crypto bank, to launch USDtb, the first GENIUS-compliant, federally regulated stablecoin, bringing compliant stablecoins to U.S. retail investors. Simultaneously, they launched StableCoinX, raising $360 million, planning a Nasdaq listing, and initiating a $260 million buyback program, igniting market enthusiasm.
Recently, Ethena founder Guy Young sat down with Hive Mind host Jose Madu for an interview, revealing the reasons behind Ethena’s rapid rise in the stablecoin space and sharing his views on the current market landscape.
Below are selected excerpts from the podcast:
Q1: Guy, you announced a major update this week regarding USDe assets, entering the treasury-backed corporate sector. Can you share some background and explain why this is significant?
Guy Young: Of course. We began preparing for this project around December or January this year, when the market wasn’t as hot as it is now—today, similar projects emerge almost daily. Observing Circle’s performance in the public markets, we realized that traditional markets have far greater demand than supply for such themes. There's massive capital eager to invest, making this an interesting opportunity for us.
From a macro perspective, I’ve been concerned over the past 18 months about capital flows into meme coins within crypto. The peak market cap for altcoins in both 2021 and 2024 was nearly identical, slightly below $1.2 trillion. To me, this signals strongly that global appetite for investing in what are mostly 99% bubble tokens is limited. The industry needs to mature. To break beyond a $1.2 trillion market cap, we must attract equity-market investors who manage large-scale capital.
We’re not focused on short-term trading at high asset premiums but on opening access to a broader investor base. Even offering token exposure at 1x net asset value is better than no access at all. It’s an interesting match—traditional markets have strong demand for such themes, while crypto faces liquidity issues. Our solution directly addresses this gap.
Q2: The news around USDe assets is exciting. When will trading begin? How much capital has been raised in total? Can you share more details? Ethena Labs tweeted this is the project with the highest cash-to-asset-market-value ratio—can you elaborate?
Guy Young: The total project size is approximately $360 million, of which $260 million is in cash. Our cash proportion is significantly higher than other similar projects because many such projects merely serve as exit liquidity tools—investors put in tokens hoping to sell them in public markets. Our goal is to bring in new cash to solve liquidity problems. The capital Ethena raised represents about 8% of the circulating market cap and will be used to buy tokens in public markets. In contrast, the second-largest, Hype, accounts for less than 2%. This stands out in the market. Relative to underlying asset scale, our project is large, and the cash raised will create a significant reflexive effect on the token. For example, $500 million doesn’t move Ethereum much, but it has a pronounced impact on our token.
Q3: Demand for pure-equity exposure to stablecoins is strong, and the regulatory environment is becoming more favorable—such as the passage of the Genius Act and the market’s enthusiastic response to Circle. Could you discuss Circle’s challenges, like how declining Treasury yields might affect your business?
Guy Young: Thanks for the question. Let me break down Ethena’s appeal for public market and institutional investors, along with how USDe works and its competitive advantages.
Stablecoin use cases are highly diverse—for example, serving as trading collateral on centralized exchanges or providing dollar-based payments and remittances for developing countries. In the future, each issuer will specialize in specific niches rather than trying to become a one-size-fits-all solution.
Ethena’s strategy is clear: we focus on use cases where we can outperform others by 10x. As a startup competing against giants worth tens of billions, we don’t expect to win across the board. Instead, we’re doubling down on savings as a use case.
A dollar-denominated asset with structurally higher returns is simply a better savings tool than a non-yielding one. This advantage extends to other scenarios too—like serving as collateral for perpetual contracts or being embedded into DeFi applications to create new products. This is Ethena’s niche and where we achieve growth.
In 2024, USDe delivered an average annualized yield of 18%, four times that of Circle’s interest income. On a risk-adjusted basis, Ethena’s asset scale equates to $28 billion, comparable to Circle. This means we can match the revenue of giants without needing a massive balance sheet.
As for competitors, we see Tether as a partner, not a rival. Many people don’t realize that Ethena actually supports global Tether holders. In CeFi, 70% of the perpetual contract market is denominated in Tether. Every $1 of collateral flowing into Ethena generates about $0.70 in additional Tether supply. Tether doesn’t offer direct yield because its yield is indirectly paid by the market through futures and basis trades.
Ethena productizes Tether’s basis-capture use case in CeFi, creating a new product. You could say Ethena is the “yield-bearing version” of Tether. Most of our collateral consists of Tether itself, significantly boosting Tether’s growth.
Q4: Some listeners may not be familiar with Ethena—could you briefly explain how you generate yield?
Guy Young: The core strategy is cash-and-carry arbitrage or basis trading: going long spot while shorting futures or perpetuals. Crypto markets have funding rates, essentially the cost of leveraged long positions. Since these markets tend to rise over time, investors pay fees to maintain long leverage. Ethena profits by capturing the speculative premium in derivatives markets.
By analogy, all dollar assets or stablecoins represent forms of lending. Buying Circle’s USDC is like lending money to the U.S. government in exchange for an IOU. Buying Sky’s dollar assets involves over-collateralized borrowing in DeFi using ETH. USDe, meanwhile, funds long positions in CeFi. Different lending targets result in different return profiles.
Q5: During the 2021 cycle, basis trades for major coins reached 50–60% for several months. But now, with improved futures market liquidity, professional fund managers, and ETFs entering, basis spreads have clearly compressed. What dynamics have you observed internally? With Solana ETFs and other long-tail assets launching and more opportunities for professional managers, how do you see this evolving?
Guy Young: The pool of capital doing basis trades in ETFs and CME (Chicago Mercantile Exchange) is entirely separate from crypto market capital. Institutions like Millennium cannot allocate funds to crypto due to requirements for AA-rated custodians. Thus, TradFi conducts heavy trading on CME, where credit risk is nearly zero, but they can't access crypto markets. This results in a significant divergence between CME and crypto basis spreads, reflecting partial exchange-level credit risk.
Data from 2024 shows CME’s cash-adjusted basis spread at around 6.5%, 150 basis points above Treasury yields, while Ethena’s USDe yield reached 18%—a gap of 1,000 basis points. Despite CME supporting these trades, Ethena offers greater efficiency.
Many hedge funds allocate capital to Ethena because USDe isn’t fully staked (sUSDe). When USDe is used as currency in AMMs (automated market makers) or order books, staking rates don’t reach 100%, so Ethena’s yield consistently exceeds self-executed basis capture. Although basis spreads compress over time, we want institutional capital to flow through Ethena—it’s a more efficient channel. That’s one of our investment theses. Critics point to basis dropping from 60% at launch, but that’s natural. Ethena grows by reducing crypto’s capital costs to reasonable TradFi levels (e.g., 10–12%) instead of 20–30%.
Q6: People often focus on high funding rates for certain coins, but Ethena reduces these rates, potentially masking the true scale or degree of long speculation. What are your thoughts?
Guy Young: Exactly. The market was hotter before Ethena existed, especially for BTC and ETH. A good way to observe this is Hyperliquid’s funding rate. Currently, Hyperliquid’s rate is around 25%, while Binance’s is 11%. Two reasons: first, Hyperliquid’s retail capital flows are more organic, whereas centralized exchanges have more institutional players; second, Hyperliquid lacks portfolio margining, meaning you can’t fully collateralize a $100 perpetual short with $100 of BTC.
Therefore, its funding rate must be adjusted to compare fairly with CeFi. Since Ethena isn’t yet active on Hyperliquid, Hyperliquid reflects genuine retail capital flows unaffected by institutional capital or Ethena—making it an ideal benchmark for gauging real market heat.
Q7: Recently, the crypto space welcomed a long-awaited event—the passage of the Genius Act, the first federal law targeting stablecoins. You announced a partnership with Anchorage, positioning yourselves as the first stablecoin compliant with the Genius Act. Could you discuss the Genius Act, your view on it, and the details and significance of this collaboration for Ethena?
Guy Young: We’re transitioning our issuance structure from an offshore BVI entity to direct issuance of USDtb by Anchorage. Anchorage is the only federally regulated U.S. bank handling crypto. They’ll roll out a suite of products, effectively offering “Genius-as-a-service” for various issuers to meet compliance. Our strategy is dual-track: via Anchorage, USDtb will comply with the Genius Act and can be used in any U.S. scenario allowing payment-focused stablecoins; USDe will remain primarily in offshore DeFi markets, outside the U.S. regulated financial system.
Both markets are important, but our excitement about entering the U.S. stems from the fact that stablecoin use cases are largely international. Americans already have instant digital cash via apps like Venmo, just in different forms. U.S. competition is also fiercer, with money market funds coexisting alongside stablecoins, limiting revenue potential. While we’re excited about the U.S. entry, offshore remains the most dynamic operating environment. Tether’s success proves this—they focused offshore from day one.
Q8: I’m curious—stablecoins are hot right now, everyone’s talking about them. Every big company seems to have a stablecoin strategy, and there are many infrastructure startups emerging, like Tether’s chain or other developments. What’s your take? You likely have deep market insights. What’s most interesting in the stablecoin space today? What’s overhyped? What’s underappreciated?
Guy Young: I’m quite pessimistic about new entrants trying to compete with established giants. The market is excited about the topic, but finding a breakthrough is hard. Stablecoin products are highly commoditized, making differentiation difficult for startups.
Stablecoins must meet three criteria: they must be dollar-denominated, or they’re out the next day; in terms of liquidity, you can’t match Tether’s $100 billion daily volume on day one; and third, yield.
If a stablecoin is backed by Treasuries, margins become a race to the bottom. Circle has already started this, sharing yield with Coinbase and others. I’m negative on the unit economics and business models of stablecoin issuers. Tether is the exception—they built an unshakeable position at a unique moment. No one can replicate their success at that exact time. I’m skeptical of new issuers claiming to share 90% of yield—it’s a tough path. For a business model to work, earning just 5–10 bps profit requires $100 billion in scale to become an attractive investment. That’s why I’m most bearish on this segment—even though we ourselves are a dollar and stablecoin issuer.
Q9: Earlier we discussed stablecoins—if $3.5 trillion in capital becomes liquid stablecoins, especially flowing into crypto, part may go to Bitcoin, which is very exciting. Recently, crypto has performed well—ETH/BTC ratio has rebounded above 0.03, outperforming BTC. Solana has done well too. What’s your take? Will the market keep rising? Where are we in the cycle?
Guy Young: Long-term, I remain very bearish on ETH and other Layer 1s (L1s), viewing them as the most overvalued financial assets in history. Short-term, ETH’s narrative has shifted—not competing with Solana on on-chain activity, but positioning itself as a vehicle to attract TradFi capital, competing with BTC.
As long as these instruments trade at 2.5x to 4x net asset value (NAV), the market won’t collapse. But if premiums slide from 1.5x to 1x, that could signal the end of the cycle. When new instruments stop launching, premiums may crash because existing ones rely on equity market buying pressure. Without sufficient demand, the market could unravel. Right now, new capital is still flowing in, sentiment is strong—Saylor just increased issuance from $500 million to $2 billion, and instruments still trade at high premiums. This trend may continue. But watch for signs of slowing new instrument launches—that could be the turning point.
I won’t comment on our own project, but examples like Hyperliquid have already decoupled from reliance on ETH or L1s, growing via cash flow like true equity-like assets. Altcoins need to mature—moving beyond mere L1 beta to having independent revenue and users. In the future, 5–10 projects like Hyperliquid could be priced on equity investment logic, detached from L1 valuations. I believe BTC should dominate 90% of the market, other L1 valuations should drop to a tenth of current levels, and a few equity-like businesses will stand out—just as Coinbase and Robinhood have performed this year.
Q10: Regarding Ethena, USDe has reached $6.8 billion in scale. How large do you think the market can support? If everyone knows Ethena’s yield, how big can the perpetual futures market sustain?
Guy Young: The market potential is huge. Currently, open interest is around $110–120 billion, with yields of 15–20%. The three major cash flow sources in crypto are Binance equity, Tether equity, and futures basis trading. Ethena captures 6–10% of the derivatives market—I believe it should reach 20–25%, or $20–30 billion, assuming no major market expansion.
Last December, when funding rates hit 30%, Ethena’s scale reached $2.88 billion. With access to traditional institutions, it could grow even larger, compressing rates to 10–12%. But if L1 valuations decline, products like Hyperliquid and Ethena that depend on L1s will be affected. A few projects like Pump earn through new token emissions and aren’t fully reliant on L1 valuations.
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