Multicoin Capital: Why are we bullish on Ethena in the long term?

Systemic Positive Factors for the Synthetic Dollar

Ethena is at the intersection of three powerful trends reshaping modern finance: stablecoins, perpetuity, and tokenization.

Stablecoins

Currently, there are over $300 billion in stablecoins in circulation, and this figure is expected to grow to trillions of dollars within a decade.

For nearly a decade, USDT and USDC have dominated the stablecoin market, together accounting for over 80% of the total supply. Neither directly shares yield with holders, but we believe that sharing yield with users will become the norm rather than the exception over time. We believe stablecoins compete and differentiate themselves on three key vectors: distribution, liquidity, and yield. Tether has built superior liquidity and a global distribution network for USDT. It serves as the primary pricing asset in crypto trading and is the most widely used way to access digital dollars in emerging markets. Circle, on the other hand, focuses on distribution by sharing economic benefits with partners like Coinbase. While this strategy has been effective for growth, it has put pressure on Circle's profit margins. As crypto adoption accelerates, we expect more companies with deep distribution networks in the financial and technology sectors to issue their own stablecoins, further commoditizing the government-backed stablecoin market. For new entrants to the digital dollar space, the primary way to stand out has always been by offering higher yields. The narrative surrounding interest-bearing stablecoins has gained momentum in recent years. However, those backed by US Treasury bonds have failed to offer sufficient yields to drive meaningful adoption within the crypto space. This is because the opportunity cost of crypto-native capital has historically been higher than US Treasury yields. Among the new entrants, Ethena is the only project to have achieved meaningful distribution and liquidity, primarily thanks to its higher yields. Based on sUSDe's price movement since launch, we estimate its annualized yield to be slightly above 10%, more than double the yields of Treasury-backed stablecoins. It achieves this by utilizing basis trading, a strategy that monetizes market demand for leverage. Since launch, the protocol has generated nearly $600 million in revenue, with over $450 million generated in the past twelve months.

Ethena Token Terminal

We believe that the true criterion for judging the adoption of a synthetic dollar is whether it is accepted as collateral by major exchanges. Ethena has done an excellent job of integrating USDe into the core form of collateral on major centralized exchanges such as Binance and Bybit, which is a key driver of its rapid growth.

Another unique aspect of Ethena's strategy is its slight negative correlation with the federal funds rate.

Unlike Treasury-backed stablecoins, Ethena is expected to benefit from falling interest rates, as lower rates stimulate economic activity, increase demand for leverage, lead to higher funding rates, and strengthen basis trading that supports Ethena's yield. We saw a version of this in 2021 when the spread between funding rates and Treasury yields widened to over 10%. Admittedly, as crypto integrates with traditional financial markets, more capital will flow into the same basis trading, narrowing the spread between basis trading and the federal funds rate, but this integration will take years.

Government Bond Rates vs. Funding Fees

Finally, JPMorgan Chase predicts that interest-bearing stablecoins could account for up to 50% of the stablecoin market in the coming years. With the total stablecoin market expected to surge to trillions of dollars, we believe Ethena is fully capable of becoming a major player in this transformation.

Perpetualization

Perpetual futures have already achieved strong product-market fit in the crypto space.

Net New Distribution Driven by the Integration of Fintech Companies and Decentralized Perpetual Exchanges

When we first published our paper on decentralized digital dollars backed by basis trading, decentralized derivatives exchanges were still in their early stages, with poor liquidity and not yet ready for mainstream use. Since then, stablecoins have become mainstream, and low-fee, high-throughput chains have been put to the test. Today, platforms like Hyperliquid facilitate approximately $40 billion in decentralized perpetual trading volume daily, with $15 billion in open interest.

Daily DEX Perpetual Trading Volume

As crypto regulation becomes more favorable, fintech companies around the world should increasingly embrace crypto technology. Leading players like Robinhood and Coinbase have evolved into "full-category exchanges." Many of them have integrated with DeFi middleware to support spot trading of long-tail assets not listed on their platforms.

Currently, most non-crypto-native users only have access to a limited number of crypto assets, and only in spot form. We believe this group represents a huge untapped demand for leverage. As decentralized perpetual exchanges become mainstream, it's natural to expect fintech companies to directly integrate these products.

For example, Phantom recently integrated with the decentralized perpetual exchange Hyperliquid, allowing users to trade perpetual contracts directly from their Phantom wallets. This integration added approximately $30 million in revenue annualized. If you're a fintech founder seeing this, it's hard not to want to follow suit. For instance, Robinhood recently announced its investment in the decentralized perpetual exchange Lighter. We believe that as fintech companies adopt crypto perpetual contracts, they will create a new distribution channel for these products, driving higher trading volumes and open interest, thereby expanding the capacity and scalability of basis trading supporting Ethena. Tokenization The superpower of crypto technology lies in its ability to allow anyone to seamlessly issue and trade tokens. Tokens can represent anything of value, from stablecoins and L1 assets to Meme coins and even tokenization strategies. In traditional finance, the closest equivalent to tokenization is ETFs. Today, the number of ETFs in the US exceeds the number of publicly listed individual stocks. ETFs package complex strategies into a single, tradable code, allowing investors to easily buy, sell, or hold them—without worrying about execution or rebalancing. All this complexity is handled by the ETF issuer behind it. Unsurprisingly, the CEO of BlackRock, the world's largest ETF issuer, seems fully committed to tokenization. Tokenization goes beyond ETFs, making assets faster, cheaper, and easier to hold and trade at any size, while also improving distribution and capital efficiency. Anyone with an internet connection can instantly buy, sell, send, or receive tokens, and even stake them as collateral to unlock additional liquidity. We envision a future where fintech companies around the world become the primary distributors of tokenized strategies, bringing institutional-grade products directly to global consumers. Ethena started by tokenizing basis trading, but nothing has stopped it from diversifying its revenue streams over time. In fact, it is doing so today. When basis trading offers low or negative returns, Ethena can move some of its collateral to USDtb (a stablecoin backed by BlackRock's tokenized government bond fund BUIDL) within its ecosystem to maintain stability and optimize yields. Reasons to Invest in ENA While we have so far described the reasons why we believe Ethena's potential market size is bullish in the long term, it is also important to learn more about the team and protocol characteristics, particularly regarding risk management, value capture, and future growth opportunities. "I quit my job a few days after Luna crashed to build Ethena, and assembled the team a few months after the FTX incident," said Guy Young, founder of Ethena. In our experience, Guy has proven to be one of the most insightful and strategic thinkers in the DeFi space, bringing his experience investing at Cerberus Capital to a crypto market undergoing rapid financialization. Guy's success is supported by a lean and experienced operations team of approximately 25 people. To name just a few members of the Ethena team: Ethena's CTO, Alex Nimmo, was one of the first employees at BitMEX, where he helped build and develop perpetual futures into one of the most important financial instruments in the crypto space. Ethena's COO, Elliot Parker, previously worked at Paradigm Markets and Deribit. His connections with market makers and exchanges contributed to Ethena's successful integration with these counterparts. The results speak for themselves. Ethena became the largest synthetic dollar in less than two years. During this time, the team acted swiftly, integrating with top centralized exchanges and building hedging channels that most projects would take years to achieve. USDe is now accepted as collateral on major venues like Binance and Bybit. Many of these exchanges are also investors in Ethena, demonstrating a clear strategic alignment between the protocol and key players in the global crypto market. Risk Management: My partners Spencer and Kyle wrote an article in 2021 titled "DeFi Protocols Don't Capture Value, DAOs Manage Risk." The core argument is simple: DeFi protocols that don't manage risk and attempt to charge fees will be forked, and there will always be free forks. Meanwhile, protocols that inherently manage risk must charge fees, otherwise no one will support the system. Ethena best embodies this principle. The protocol has demonstrated strong risk management capabilities, successfully weathering two major stress events this year alone, each reinforcing its credibility, resilience, and brand trust within the crypto ecosystem. Bybit Hack: The Biggest Crypto Hack to Date The $1.4 billion Bybit hot wallet hack on February 21, 2025, was a real-world stress test of Ethena's exchange counterparty model. The incident triggered a massive wave of withdrawals from Bybit, but Ethena's strategy remained unaffected. Because the hedges and collateral were spread across multiple venues and protected in off-exchange custody, Ethena maintained normal operations throughout the event. Importantly, there was no loss of collateral on Ethena, nor was there any disruption to the flow of funds related to minting or redemption due to the Bybit incident. On October 10, 2025, the crypto market experienced an extreme deleveraging event, with approximately $20 billion in positions being liquidated within hours as open interest on major CEXs and DEXs collapsed. During the chain of liquidations, USDe briefly traded as low as approximately $0.65 on Binance due to the design of Binance's oracle system, drawing criticism. However, USDe remained near parity on more liquid on-chain venues (such as Curve) (see chart below), and redemption functionality continued to operate normally, indicating that this was a venue-specific misalignment rather than a systemic de-pegging. Guy's tweet on X is excellent reading material for understanding the events of October 10th. In both events, the Ethena team communicated transparently, and no user funds were lost. Meanwhile, the protocol continued to function normally, processing nine-figure redemptions within hours, all verifiable on-chain. Moments like these test the risk discipline of any protocol. Successfully managing such stress events on a large scale not only enhances trust and credibility but also builds brand value and resilience—creating a strong moat for DeFi protocols like Ethena. To be clear, it's reasonable to expect the Ethena protocol to undergo more stress testing in the coming years. We are not suggesting that risks are nonexistent or have been fully mitigated, but rather highlighting Ethena's strong performance and resilience during some of the most significant market stress events in recent memory. We believe Ethena can command higher fee rates than stablecoins like USDC. Unlike USDC, Ethena actively manages market risk, shares higher returns with users in most cases, and may be negatively correlated with interest rates in the short to medium term, all of which reinforce its ability to capture and sustain long-term value. While the ENA token currently operates primarily as a governance token, we believe there is a clear path for it to begin accumulating value. Ethena generated approximately $450 million in revenue over the past year, none of which was passed on to ENA token holders. A fee switch proposal, introduced in November 2024, outlined several milestones that needed to be reached before value could flow to ENA holders. All of these conditions were met before the October 10th crash. The only metric currently below its target is the circulating supply of USDe, which we expect to exceed $10 billion before the fee switch is activated. The risk committee and community are currently reviewing the implementation details of the fee switch. Our assessment is that these developments are likely to be welcomed by the public markets as they strengthen Ethena's governance consistency, long-term holder base, and reduce selling pressure on the token.

Long-term growth potential

Ethena is already one of the highest-grossing protocols in the crypto space.

Ethena is leveraging its leading position to launch a range of new product lines built on its core strengths in stablecoin issuance and crypto perpetual exchanges. These product lines include:

Ethena Whitelabel: A stablecoin-as-a-service product where Ethena builds stablecoins for the largest chains and applications. Ethena has already launched Ethena Whitelabel through partnerships with megaETH, Jupiter, Sui, and others via SUIG.

Ethena Whitelabel

Ethena Whitelabel is already one of the highest-grossing protocols in the crypto space.

Ethena is leveraging its leading position to launch a range of new product lines built on its core strengths in stablecoin issuance and crypto perpetual exchanges.

Ethena Whitelabel: A stablecoin-as-a-service product where Ethena builds stablecoins for the largest chains and applications. Ethena has already launched Ethena Whitelabel through partnerships with megaETH, Jupiter, Sui, and others via SUIG.
Long-term growth potential
Ethena is already one of the highest-grossing protocols in the crypto space.
Ethena is leveraging its leading position to launch a range of new product lines built on its core strengths in stablecoin issuance and crypto perpetual exchanges.