Ethena raises $14m funding round and launches stablecoin with 23% yield
Summary
An Ethena spokesperson noted that the Brevan Howard funding deal has not closed.Crypto derivatives exchanges Binance, Bybit, OKX, Deribit, Gemini, and Kraken participated in an earlier $6 million round led by Dragonfly and Arthur Hayes, the founder of crypto exchange BitMEX.Select investors have been able to mint USDe since December.Beginning today, any investor outside the US, Russia, and more than two dozen smaller countries will be able to mint the stablecoin.USDe will try to break into a highly competitive and lucrative field. Stablecoins are among the most popular real-world applications of crypto technology.They have also been a cash cow for issuers like Tether, whove backed their tokens with US Treasuries.Tether posted a net operating profit of more than $6 billion in 2023.Ethena founder Guy Young doesnt expect USDe to leapfrog Tethers USDT or Circles USDC, which have a combined market capitalisation of just under $125 billion.The goal is to create a mass-market stablecoin backed by Ether and versions of staked Ether, rather than real-world assets such as cash and US Treasuries.We are definitely not as decentralised as stuff like Liquity, Young told DL News. Its a complete joke that DeFi runs literally 100% on centralised stablecoins.Unlike LUSD or RAI, however, it will rely on old-fashioned businesses for certain functions.Custodians with experience managing crypto, such as Fireblocks and BitGo, have been tapped to hold customer deposits, for example.Theres huge centralised components to what were doing, he said.Since it became available to some investors in December, USDes market capitalisation has topped $225 million, making it one of the 12 largest stablecoins, according to DefiLlama data.Investors can lock up their USDe to create a yield-bearing token that Ethena has likened to an internet bond, called sUSDe.As of Thursday, the annual yield on sUSDe was a whopping 23%, a figure that recalls the heady days of the Terra stablecoin. And then it gets pretty crazy, to 20% to 30% when things are properly heated.He said that he expects this to remain a competitive advantage over other stablecoins.The lesson that we got from Anchor was, the demand for $1 which can return higher yield than the rest of the market by a few hundred basis points is not a billion dollars. Its like 20 [billion], he said, referring to the Terra-affiliated protocol that generated the failed stablecoins now-infamous 20% yield.It didnt matter how much risk was sitting there within Terra and Anchor, $20 billion went in there because there was a slightly higher yield.Correction: Ethena corrected its announcement to remove Franklin Templeton and PayPal Ventures, which are not participating in the funding round, and to clarify that Binance, Bybit, OKX, Deribit, Gemini, and Kraken participated in the companys previous fund raise.Correction: Ethena also clarified that the Brevan Howard deal has not yet closed.Aleks Gilbert is a New York based reporter covering DeFi.