TechFlow news: Su Zhu, co-founder of 3AC, stated on X that Ethena simplifies the user experience for participating in basis arbitrage, and during a supercycle, the total asset management (TAM) could be substantial, potentially exceeding $50 billion in positions.
Most of the yield comes from people using high leverage to trade Ethereum perpetual contracts, hence there's a cognitive inconsistency in warning about leverage usage while simultaneously requiring leverage growth. The yield spread will converge to a stablecoin risk-weighted asset yield above the credit default risk of centralized exchanges where the underlying assets are held. This is essentially overnight lending offered to the highest bidder.
Ethena has a solid basket model by diversifying investments across exchanges, although how they rebalance over time remains unclear.
