Ethena under Arthur Hayes' endorsement: Is the billion-dollar breakthrough just hype, or is it a prophecy coming true?

In the past 40 days, Ethena's USDe supply has experienced significant growth, soaring from approximately $242 million on February 18 to $1.376 billion on March 28, an increase of 468.79%. This followed a $14 million strategic financing led by top investors completed on February 16, bringing the total fundraising to $300 million. Ethena not only announced a large-scale airdrop plan, expected to distribute $1.3 billion worth of USDe tokens to users on April 2, but also caught the attention of notable figures in the crypto space, such as Su Zhu, who mentioned that Ethena has brought new capital dynamics to the market.
Additionally, prominent figure Su Zhu shared his views on Ethena via social media on March 19. He pointed out that Ethena introduces a new dynamic to the cryptocurrency market, where investors may reconsider their positions when funding rates trend towards neutrality in conventional spot holdings and short contract arbitrage strategies. Specifically regarding Ethena, its existence allows a portion of assets to be staked and converted into USDe, which may affect the price volatility of Ethereum (ETH), leading to more pronounced price corrections and faster rebounds.
In the following text, we will delve into how the influential Ethena has stirred such waves in the blockchain field.

Arthur Hayes and Ethena: An Unbreakable Bond and Resonance with Technological Trends

In 2023, inspired by Arthur Hayes' profound insights, the Ethena protocol was born, marking a significant leap in the decentralized stablecoin space. Arthur Hayes is not only a heavyweight in the cryptocurrency field but also a source of inspiration for many innovative ideas. His critical thinking about crypto stablecoin systems, particularly his concerns about their excessive reliance on traditional banking systems, provided the theoretical foundation for the birth of Ethena. Ethena aims to build a stablecoin solution that does not depend on traditional financial systems, addressing a core issue that has long existed in the crypto space—how to create a stable and scalable currency in a decentralized environment.

As we enter 2024, Arthur Hayes once again expressed his firm belief in Ethena, predicting that Ethena has the potential to surpass market leader Tether and become the largest stablecoin. This is not only based on Ethena's unique technological advantages and innovative financial tools but also reflects Arthur Hayes' macro perspective and deep insights into the future of decentralized finance (DeFi). The emergence of Ethena is seen as a key step towards maturity in the crypto space, with its provision of "internet bonds" and synthetic dollar USDe representing a solid step towards the future of decentralized finance.
The unbreakable bond between Arthur Hayes and Ethena is reflected not only in the founding inspiration of Ethena but also in his strong optimism about its future development potential. Through profound criticism of the traditional financial system and forward-thinking in the cryptocurrency field, Arthur Hayes has paved the way for Ethena that combines theory and practice. It is this combination of critical thinking and innovative spirit that places Ethena at the forefront of decentralized stablecoin development, showcasing a more free, open, and inclusive financial future to the world.

Ethena Airdrop Frenzy: Early Layout, Sharing the Governance Token Feast

With the Ethena protocol, a decentralized finance (DeFi) platform with a market cap of $1.3 billion, preparing to launch its ENA governance token next week, we are witnessing an important milestone in the token economics of the cryptocurrency space. By distributing ENA tokens to holders of the "synthetic dollar" USDe, Ethena not only gives back to the community but also initiates a token-based decentralized governance system.

Ethena Token Distribution Strategy: Building an Ecosystem for Mutual Benefit

According to Ethena's token distribution strategy, core contributors, investors, the foundation, and ecosystem development each account for a certain percentage of the total supply. Specifically:
Core contributors account for 30%, rewarding team members who have made core contributions to the development of the Ethena protocol.
Investors account for 25%, representing the token rights obtained by investors who support the development of the Ethena protocol.
The foundation accounts for 15%, which will be used to further promote the adoption of USDe, reducing the crypto world's reliance on traditional banking systems and centralized stablecoins, and for future development, risk assessment, auditing, and other aspects.
Ecosystem development accounts for 30%, with 5% of this portion being distributed to users as the first round of airdrops, while the remaining portion will support various Ethena plans and incentive activities in the future.

Q2 Activities Launching Sats Rewards

After the launch of Ethena's governance token, the "Q2 Activities" will be immediately initiated to further expand its token economic model. This event will particularly focus on the development of new products that use Bitcoin (BTC) as a supporting asset, which not only expands the growth potential of USDe but also brings broader market acceptance and application scenarios for Ethena.

Sats Rewards, as the core of the Q2 activities, aims to reward users participating in the construction of the Ethena ecosystem. By enhancing rewards for early users, Ethena further strengthens the sense of participation and belonging within the community while also encouraging new users to join. The design of this incentive mechanism demonstrates Ethena's recognition of the importance of building a lasting and active community.

Through a carefully designed token economic model and incentive mechanism, Ethena is committed to building an inclusive and sustainable DeFi platform, exploring new paths for the future of decentralized finance.

Insight into Ethena: Can It Steadily Operate a Cross-Chain Value Symbiosis?

Stablecoins are regarded as a fundamental financial tool not only in the crypto space but also in traditional financial markets. By arbitraging the price differences between spot assets and futures instruments, basis trading has a long history and is widely applied. In the crypto market, this trading method is particularly mature, with longs typically paying rates to shorts to maintain positions, resulting in perpetual contract prices often exceeding spot prices.

Ethena, as an open hedge fund, adopts the above strategy and tokenizes its trading collateral into USDe stablecoins. By shorting an equivalent amount of ETH, Ethena creates a delta-neutral portfolio, ensuring that the net asset value does not fluctuate with market movements. This strategy allows Ethena to benefit from ETH staking and financing rates.

However, Ethena's model also carries potential risks, such as collateral decoupling risk, uncertainty in financing rates, and counterparty risk. Especially in cases where LST collateral and regular Ether are mixed, if the collateral decouples from ETH, Ethena may suffer paper losses.

To mitigate these risks, Ethena employs an Over-the-Counter Settlement (OES) solution, entrusting funds to reputable third-party custodians, only mapping to centralized exchanges to provide trading margin, thereby reducing the amount of funds deposited in centralized exchanges.

Although Ethena currently only uses staked ETH as collateral, the protocol may further utilize BTC as collateral to expand its scale, although this may dilute the returns of USDe.

So, what is the worst-case scenario for Ethena? Aside from standard crypto risks, such as team fraud and smart contract vulnerabilities, Ethena-specific risks include the bankruptcy of exchanges and the liquidation of unsettled hedge positions. To address these situations, Ethena settles PnL daily to reduce capital exposure. If an exchange or OES custodian goes bankrupt, it may be necessary to use leverage in other accounts to maintain portfolio delta neutrality.

Finally, we must ask, amidst these risks, can Ethena continue to provide its attractive annualized returns? The risks and economic returns in the crypto world are always parallel, aren't they?