原文作者:defioasis
Original source: Wu Shuo Real
This issue is hosted by Wu Shuo analyst defioasis, and the guests are Shang @lasertheend Shang, a former BitMEX analyst and Wu Shuo English podcast host, and @sankin_eth of Xiao Guo, an on-chain analyst and Wu Shuo consultant.
Disclaimer: This article does not provide any financial advice, please strictly abide by the local laws and regulations, the views of the interviewee do not represent the views of Wu Shuo and the interviewer, please distinguish clearly.
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Moderator: Ethena was originally inspired by BitMEX founder Arthur Hayes, who worked to create a derivatives-backed stablecoin. In simple terms, Ethena eliminates the price instability of the underlying collateral asset by holding an equal amount of staked ETH (i.e., LST) and an ETH perpetual contract short position to build a stablecoin, i.e., USDe. This effectively creates a delta-neutral CDP where the yield on staked USDe (sUSDe) actually comes from basis trading. The portfolio of assets that hold spot and short futures is also known as "spot arbitrage", and the current USDe yield is about 17%.
For stablecoins, this yield is very high, because in fact, the current benchmark yield of US demand is about 4%. This is reminiscent of UST back then, when Anchor UST yielded 20%. But in the end, everyone knows that LUNA, which has a market value of tens of billions, collapsed in one day, and UST became waste paper. Of course, the mechanics of Ethena USDe are very different from LUNA/UST.
Ethena USDe 的结局是否会像 UST 一样脱钩
DS: USDe and UST are very different, and my answer is no. You may not know how high the cost of capital is in the currency circle. Behind such a high yield of Ethena does not actually mean that the stablecoin is sustainable, it can be said that the cost of capital in the currency circle is unsustainable. My answer is that Ethena has some risks of its own, but those risks are reasonable relative to its benefits.
Lao Guo: My conclusion is yes. Because all stablecoins pegged to the US dollar carry some risks to some extent, but under what circumstances these risks will be greatly exposed. Including in 2019, Tether, the issuer of USDT, also raised questions about whether there were some problems. At that time, the USDT over-the-counter quotation also fell to $0.8, $0.7. In my opinion, all USD stablecoins, whether algorithmic, collateralized, or USDT-mapped, are at risk of de-anchoring. We can't talk about whether a stablecoin can grow healthily without the risk of depegging, because we need it to be stable, and we need it to be converted 1:1 into dollars. So its biggest risk, all the risks, will be attributed to the de-anchoring.
DS: Ethena is a stablecoin that needs to be discussed with Tether, not a stablecoin like LUNA.
Where is the point where USDe depegs may be
Guo: I think it's only a matter of time before Ethena is exposed to risk, but that doesn't stop us from participating in it now. Including me now, I'm also participating in some Ethena gameplay, which is still quite interesting. But I want to talk about the points of decoupling, and I hope to warn you about the points where it may cause problems. Whether you invest in Ethena, ENA, or USDe, it may incur some risks.
First of all, these risks are clearly warned in the official Ethena documentation, which is rare. Officially, there are probably 5 types of risks, namely capital risk, liquidation risk, custody risk, exchange failure risk and collateral risk. The first four risks are all related to centralized exchanges. All of Ethena's sources of revenue, or most of the stablecoins, are on exchanges. Let's start with these four risks.
The first risk is capital risk. Ethena's source of revenue is through the perpetual contract funding rate. The funding rate is the scenario of the contract, which will have a natural default value, and there will be a benchmark value of 1/10,000 for short positions. When the spot price and the contract price are decoupled, it will balance the long and short positions through the adjustment of this benchmark value. So most of the time, the funding rate as a short position is profitable. To put it simply, when the bull market rises higher, the funding rate increases, and when a bear market or crash occurs, the funding rate is negative, and the short position needs to pay interest to the long position. In that case, Ethena's earnings will have to pay these interests in addition to zero income. Of course, the official also suggested that there would be some hedging and the like. In the long run, 312 and 519 will briefly have a negative funding rate within 30 days or 15 days.
The second risk is the risk of liquidation. This is because there are some things that can happen with a balanced position. It is to use the assets of ETH as collateral and then open a short position on the exchange. The question here is where? Many people say that a double short order will not be liquidated. Yes, but this is in the case of coin-margined perpetuality. In fact, the logic that it will not blow up is that in the coin-margined perpetual, it can use the currency-margined margin to ensure the balance of the margin against the US dollar price when it rises. However, the current way Ethena is used, we can't directly see its position on the exchange, and the documentation says that it may be a mix of ETHUSDT perpetual shorts. When we use spot to short USDT swaps, risks will arise in extreme market conditions.
Both of these are about the risks of strategy trading. The latter custody risk and exchange failure risk are actually not the risks of the exchange RUG that we traditionally talk about. We all thought that many exchanges were too big to fail, and with the failure of FTX, we saw that the risk of exchanges was not that they did not exist, but that we coveted convenience and low fees to use such custody methods to trade cryptocurrencies. So why split the two risks here? is because Ethena uses a method that does not store the real assets on the exchange, but in a third-party custodian. The custodian provides some proof to the exchange, so that it can use the funds provided by the custodian to make transactions on the exchange. This is where a third party is used to mitigate some of the risks of the exchange itself. Of course, as a third-party custodian, the custodian itself also has a risk of hosting schemes.
The final risk is that Ethena uses a method to generate more interest by swapping ETH for Lido stETH. There is also a risk here, such as the decoupling of Lido's own stETH and the risk of Lido's node staking, such as a large disconnection of nodes, resulting in the deduction of node income profits, or a vulnerability in Lido's own deposit contract that was stolen by hackers.
Taken together, there are quite a lot of risk points. Many risks have happened in the past. So I think it's pretty obvious that there are some risks that could arise in the future of Ethena or in its entire development career.
Among these risks, what is the largest and greatest risk that USDe may face in the future
Lao Guo: I think the biggest risk should come from the sharp fluctuations in the market. One of the most likely points in my mind is that the market will fluctuate violently, resulting in an imbalance between its spot long positions and contract positions. But I also think that it will not be completely unanchored, completely zeroed, like UST is, but partially unanchored. At present, there are some ways to hedge these risks, such as putting multiple exchanges and multiple custodians. The final solution will not be completely zeroed out like LUNA, but after a large number of de-anchoring, everyone will lose information about the variety, making its share smaller and smaller, and including the yield will not be as high. At present, most of the participants are not only the yield of USDe itself, but also for the purpose of mining ENA.
What do you think of the risks that Lao Guo said?
DS: I think there are two kinds of decoupling, one is the LUNA/UST decoupling, which will not go back after decoupling. I don't think USDe will be decoupled like LUNA. I also fully agree with the risks that Lao Guo said above. When I say that USDe will not be decoupled, I want to express that it is not an independent risk in Crypto, and it will also perform with the Crypto market as a whole. Of course, I'm not saying that USDe is particularly good.
USDe, or the mechanism behind it, is directly related to the entire Crypto system. If something goes wrong with USDe, it could be something wrong with the entire industry. It's not because there's something wrong with USDe, it's the whole crypto system that's going wrong. That is, if there is a big problem with USDe, then it is premised on the fact that there is a problem with the entire crypto system or centralized exchange, or there is a problem with staked ETH such as restake, which is very, very fatal to the entire crypto industry.
USDe is the native stablecoin compared to Crypto Native, which does not rely on any very traditional financial and banking related systems. To a certain extent, it is also a relatively good thing. Like Tether and Circle, they may be sanctioned by the big centralized banks, but Ethena is not, because all of its risks are in the crypto system.
Of course, I also agree with what Lao Guo just said about the risk. Ethena's mechanism is a very simple basis trade, long spot and short futures, which is something that we can do ourselves, and it's not particularly difficult. There are risks, for example, Pendle PT yields are 60%-70%, but 70% APY is worth participating. If the funding rate is lower and lower in the future, and the bear market comes, the result of Ethena will not go to zero, but like we do our own trading, to close those losing positions, which also means some slippage costs and funding fees, but overall controllable. It may be depegged to $0.95 or $0.9, but its position value is still there, unless there is a fatal blow to the industry as a whole, such as a problem with a centralized exchange, or a problem with staked ETH.
For example, if USDe is really depegged to $0.95 or $0.9, and you think that it will be re-anchored at the earliest, then you will consider buying the bottom, or to what extent will you consider buying the bottom, in the hope of getting the benefits of re-anchoring
DS: A very important premise is the expectation of the future, and all the financial costs of capital are for everyone's expectations. If I feel that I am still optimistic that this market will rise in the future, it is natural that the cost of capital will be higher and higher in the future. Perpetual futures are ultimately the cost of leverage, and the more people who add leverage, the higher the cost of capital will be, which is on the demand side. In addition, there is also thinking about the supply side. Now I think Ethena has seized a particularly good opportunity, and a lot of big centralized traditional financial institutions are becoming more and more afraid to touch Crypto. But this strategy that doesn't make money in traditional finance can make a lot of money in Crypto, such as the basis trading of gold futures in traditional finance, no one will talk about it. In Crypto, this very simple basis trade can make a lot of money. If there are many traditional financial institutions that use their own funds to drive down these interest rates in the future, it will also have a great impact on the future of Ethena.
All in all, (if decoupled), buying the bottom is not a particularly good strategy. No matter how confident it is, its benefit-risk ratio is not symmetrical. Neither a 10% nor a 90% probability should be done, because in the end you can only make up to 10%, but you can lose 100%.
Ethena 关于 Crypto Native 稳定币的命题
Lao Guo: Shang mentioned one of Ethena's propositions, to be a crypto and a native stablecoin. I think Ethena is a newer way to explore and update compared to the past Aave, MakerDAO, including USDT, and even earlier algorithmic stablecoins. There are some problems with this method itself, it is called the native stablecoin of cryptocurrency, but we found that its yield, balance, and stability all come from a centralized situation relative to non-transparent and non-public. Its transparency is contrary to the entire cryptographic nature. So if you really play this solgan from the point of view of Crypto Native, from my point of view, I will not be too attracted to this point. From the perspective of Ethena's investors, they are also relatively large centralized exchanges. What appealed to me was that Hayes was able to gather these people together and put the money in it by brushing his face. Of course, he will not say that this is a centralized stablecoin, so no one will buy its governance token.
Shang: I don't think it's because he wants to go to these centralized places, but because most of the positions and positions are on centralized exchanges, so he has to open positions in a decentralized manner. If you want to make this money, the largest volume is in centralized exchanges. It's not that you can only do it on centralized exchanges, to a certain extent, it's a last resort. That's a lot of money, it's not a meme, and for anyone with a little financial literacy can do such a trade, the technical threshold is low. I believe that in the future, everyone will go to the decentralized on-chain exchange to trade, and they will also hand over these empty orders to the decentralized exchange.
The issue of contract market capacity constraints on Ethena
Lao Guo: I think this question is a bit of a mediocre problem. First of all, the generation of USDe is also managed in a relatively centralized way. When an ordinary user buys USDe, he cannot generate it through USDT or USDC, but can only exchange it out through some liquidity pools. It has a whitelist mechanism that allows certain special addresses to be generated directly from USDT, etc., instead of being purchased through liquidity pools. The second contract has a total cap switch to limit the total issuance of USDe. Limit the total issuance to avoid the collapse of funds.
Now that there are tens of billions of contracts in the market, how to do 100 billion or hundreds of billions in the future, so what do I think is the point of this problem that is a bit mediocre. If USDe can really reach 10 billion, 100 billion, then the prosperity of the entire contract market is not as small as it is now. Now USDe's market capitalization of more than 2 billion is indeed small compared to Tether's market capitalization of nearly 100 billion, but it does not say that its vision is to issue 50 billion or 100 billion when the contract market is only 30 billion, and it does not say so, and it is still relatively restrained. It's a bit like worrying about what is going to happen before that time comes. I think this concern is a bit too worrisome.
DS: Founder and I mentioned this in our podcast. At the end of the day, we don't think there's any need to compare USDe to Tether, because Tether is making too much money. Ethena's project side and ENA holders have enough money to make. So I don't think its ceiling will affect its success. As it is now, it is a very successful product. In my eyes, I will not see USDe as a stablecoin, but as a financial product, this is a very lazy DeFi Farmer or has a certain financial background but does not want to manage the risk of these yields or basis trades, then he will buy Ethena to stake. These risks, which have just been discussed, are worth the ENA subsidy. I think it's going to have a ceiling, but I can't think about these things that we can't control in the long run. At the end of the day, it also doesn't have a particularly large risk of decoupling, if the entire cryptographic system remains in a stable state.
In the worst-case scenario, Ethena eats up all the funding rates in the market, and there may be only 5% or 10% of futures trading in the future, or even negative in bad times. In this case, we will get the money back, and the project team will close all the positions, and there may be a certain amount of loss in the process, which is also worth it. Even if the project and the token can't reach too high a height, it's actually a very successful project.
In addition, it does not mean that when we hit the ceiling, our money is stuck there, we can still redeem it, we can still make money before that, and the final loss is up to 5% or 10%.
What are the suitable use scenarios for stablecoins such as USDe that hold spot and short positions at the same time to capture delta-neutral USDe?
DS: Its biggest use is to boost the underlying returns of all stablecoins. If you look at financial products, if you are interested in DeFi, you will do a natural thing, add the leverage of ordinary USD at a lower interest rate, such as 10%, and then use this 10% cost to buy USDe, USDe has an annualized rate of 70%, then you will earn 60% in the middle. If USDe is transferred to Mantle, the benefits for Mantle will be particularly great, and the stablecoins on it will have greater borrowing needs. Here's how I've seen USDe help the industry as a whole. It tokenizes the basis, which allows both hard-working and industrious people to enjoy better benefits, and also makes the cost of competition in the entire market more reasonable.
Lao Guo: Shang talked about a point that inspired me very much. When I thought about USDe before, I thought about it as a stablecoin, but I really should think of it as a DeFi strategy or a yield pool, and the whole logic of it is different. Compared to many DeFi products, I think Ethena is much less risky. Then, I think USDe has a new point, which is that it has become a so-called golden shovel in the sense, like Pendle and Mantle we talked about before, through some cooperation methods, through USDe to mine the platform coins of some other platforms, for example, Mantle will also make some points or more incentives for USDe providers in the future. So if you think of USDe as a golden shovel, or a DeFi yield pool, I think it's interesting to compare its value and risk.
Ethena in the 否值得投
Lao Guo: Our current investment strategy for Ethena is mainly divided into two types, one is to buy USDe and the other is to buy ENA. ENA's fully floatable market capitalization is exaggerated, approaching $18 billion. I used to have a very simple and crude valuation method for all DeFi products, using FDV/TVL. At present, the ratio of market capitalization is about 2 in most markets. At the moment, ENA is 7-8, which is an overrated state. But at the same time, ENA also has a large number of lock-up mechanisms, and only about 10% of ENA currently circulating in the market. From the perspective of investment cost performance, if you have a little DeFi knowledge or on-chain experience, you should use USDe to mine ENA, rather than buying ENA directly on the exchange to wait for it to rise, because its direct upside is not necessarily particularly high. Owning USDe directly allows you to do a variety of combinations, and its own earnings and stable odds will be more suitable than ENA. I don't think you should buy ENA on the exchange, but go through some on-chain operations to acquire and mine ENA, which is equivalent to obtaining ENA at a very low cost, although its volume will be viewed according to the USDe holdings.
DS: I agree with Lao Guo's FDV/TVL approach. Based on this methodology, I looked at a number of other projects and found that this is indeed a good one that is undervalued or overvalued in the long run. Like AAVE is a billion FDV, if I'm not mistaken, then Ethena ENA is eight times ten times more than AAVE, which is very exaggerated.
I think two points. The first point is that ENA's current valuation is not particularly high for its moat. It's not that we can't do these things ourselves, if it's not for the ENA token, we can do the deal ourselves, because it's very, very simple. Actually, I made one of these trades before the crash. Let's say you have $50,000, spend $25,000 to buy ETH, convert ETH into Renzo's ezETH, and then sell ezETH to Arbitrum Pendle, mint it into PT, and expire in 75 days. During these 75 days I can go and earn 10%. The remaining $25,000 goes to Binance's futures platform to earn a 20% basis. This can be calculated to be more than 40% annualized. This is much higher than the current interest rate of staking USDe directly on Ethena. If you use this basis to calculate, if you expect more from ENA's valuation, I feel that everyone's expectations are already very high, and I don't think it can be much higher in the future. I also participated in the first phase of ENA airdrops, and everyone made crazy money, and I couldn't believe that so many airdrops could be made. The first wave is so rich, and there will be fewer and fewer people in the second and third waves to pay for it, and everyone will want to dig ENA. Now that USDe has reached more than 2 billion, you may think that this plate may not be able to support so much selling pressure, and in the end, everyone will not buy ENA, but buy USDe and sell ENA.
Recently, there has been a sharp fall, and I think there are too many new projects in the market, and the funds in the market simply cannot bear so much liquidity. The more and more projects are issued, the liquidity left by each project may become smaller and smaller, because in the end, except for Bitcoin, which has been expanding, some other altcoins are PvP. So, what I will do is to buy USDe, go directly to Pendle and sell it to convert to PT, and lock in 70% annualized returns. At the end of the day, even if it fails, it won't lose more than 10%, and I believe that Ethena has raised so much and the team's ability to execute.
Share freely
DS: To give you an overview, I think Ethena USDe is a very interesting project that people can participate in, especially when the expectations and yields are high. I don't think USDe will zero out like LUNA/UST, but I do feel that there is some risk of decoupling. At the end of the day, it's directly different from the US dollar and traditional stablecoins like USDT.
Lao Guo: I think the audience (readers) who can come here are very interested in the Ethena project. My point of view is that whether you've bought USDe or ENA before, you're going to have to get involved in it. A meme produced in the cryptocurrency circle last year, IQ 50 and IQ 150 people can make money, IQ 100 people identify and recognize risk will see this as ponzi and that as a scam, and finally reap the affirmation of wise risk, but in the end they did not make a dime. I think Ethena is also such a variety, its risks are there, they can all be seen, and they can be analyzed, but it is undeniable that its benefits and growth prospects are very large at this stage. If you don't think it's risky and don't participate in it, then I don't think you're someone who is taking a risk with Crypto. Everyone's risk appetite is different, some people trade ENA directly on the secondary market, and some people use USDe to combine these risks. Either way, you should participate, but this level of participation can be done without so much money or dedication, and some of the funds can be used to perform some simple operations to really understand how Ethena works. Action is far more important than analysis and understanding.