Standard Chartered expects Ethena’s USDe synthetic dollar to grow from roughly $5 billion in supply to $40 billion by the end of 2028, an eightfold expansion that would place the protocol among the largest yield-bearing dollar instruments in crypto. The bank also projected that Ethena’s ENA governance token could reach $2 by late 2028, with interim targets of $0.42 for the end of this year and $1.10 for 2027.
The forecast depends heavily on USDe restoring growth after its supply fell sharply from a prior peak of about $14.8 billion. Around $3 billion of USDe was redeemed after a market dislocation last October, leaving the supply near $5 billion. To reach Standard Chartered’s 2028 estimate, Ethena would need to regain its former peak and then add a further $25 billion.
USDe’s appeal rests on a structure that seeks to deliver dollar stability and yield without relying on bank-held cash reserves. Ethena backs the token with crypto collateral, including Ether, while using derivatives to neutralize the collateral’s price movements. The model gives holders exposure to returns from crypto staking and perpetual futures markets, though it also leaves the protocol dependent on trading-market conditions and exchange infrastructure.
A synthetic dollar built on hedged crypto positions
Ethena launched USDe on Ethereum in February 2024. The protocol, founded by Guy Young, takes collateral deposited by users and combines it with an equal-sized short position in perpetual futures, a type of derivative with no expiry date.
If the value of deposited Ether falls, gains on the short futures hedge are intended to offset losses on the underlying Ether. If Ether rises, the spot collateral gains while the hedge loses by a similar amount. The combined position is designed to remain close to a dollar-denominated value.
That mechanism separates USDe from stablecoins such as USDC, which are generally backed by cash, bank deposits and short-dated government securities. Ethena’s model instead uses a hedged crypto basis trade, making its sustainability tied to collateral management, derivatives liquidity and the cost of maintaining those hedges.
The yield-bearing version of the token, sUSDe, currently offers an annualized yield of about 4.8%, according to the figures in the cited material. About 60% of USDe supply is staked into sUSDe, meaning much of the token base is seeking the protocol’s yield rather than simply using USDe as a transactional dollar token.
Lower funding rates have reduced returns
USDe’s returns come from staking rewards on its collateral and from funding payments in perpetual futures markets. Perpetual contracts use funding payments to keep their prices close to the underlying asset. When demand to hold long positions is high, long traders generally pay short sellers, generating income for Ethena’s hedged positions.
Those conditions have become less favorable than they were in 2024. Average annualized funding was about 11% that year, compared with roughly 5% now, according to the supplied figures. The decline helps explain why sUSDe yields have retreated from double-digit levels to the current range.
Funding can also turn negative, requiring short sellers to make payments rather than receive them. In that scenario, Ethena’s staking income would need to absorb more of the cost of maintaining the hedge. Ethena has referenced a reserve fund intended to help manage periods when funding is unfavorable, but sustained negative funding would test the yield model more directly than a short-lived market reversal.
The protocol’s financial profile is therefore more sensitive to derivatives-market conditions than that of reserve-backed stablecoin issuers. Lower funding rates reduce the cash generated by short hedges, while volatile markets can increase the operational demands of managing collateral and positions across venues.
Supply threshold would activate ENA buybacks
Ethena has connected ENA buybacks to USDe supply growth through a planned fee switch. The mechanism is set to begin once USDe supply exceeds $7.5 billion, with 5% of protocol revenue allocated to buying ENA on the market. The allocation would gradually rise to 25% if USDe supply surpasses $25 billion.
At today’s supply near $5 billion, USDe would need to grow by about 50% before the first buybacks can begin. Since September 30, Ethena has stopped distributing ENA incentives to USDe holders, placing greater emphasis on the token’s underlying yield as the driver of future deposits.
Ethena’s internal estimates, based on a 6% yield assumption, put annual buybacks at about $22.5 million with $7.5 billion in USDe supply and roughly $135 million at $15 billion. The latter level is close to the token’s previous supply high.
The structure gives ENA a more direct connection to protocol revenue than simple token-incentive programs, but it also makes the planned buybacks contingent on USDe demand and yield generation. ENA has a total supply of 15 billion tokens and traded around $0.25 in the figures cited. A large unlock took place on October 5 following adjustments to Ethena’s distribution and incentive model.
Binance dislocation exposed venue dependence
USDe’s contraction followed a sharp pricing event on Binance last October, when the token traded as low as $0.65 on that platform while prices on other venues remained near $1. Binance users had been able to post USDe as collateral, and the price move triggered liquidations. The exchange later said it paid $283 million in compensation to affected users.
BNSOL and Binance’s wrapped Ether token, WBETH, were also reported to have deviated sharply during the same episode. The event illustrated how collateral rules, liquidity conditions and price feeds on a single venue can affect users even where an asset retains a near-dollar price elsewhere.
Ethena’s hedge strategy relies on centralized trading platforms to execute and maintain derivatives positions. Exchange outages, withdrawal restrictions or disruptions in derivatives markets could complicate the protocol’s ability to adjust collateral or close positions during stressed conditions. Those risks sit alongside the usual market risk of changing funding rates.
Infrastructure business could widen USDe’s role
Ethena is also seeking to extend its model beyond USDe through infrastructure for third-party stablecoin issuers. EtherFi has announced a stablecoin using Ethena’s setup and has reported more than $300 million in stablecoin deposits alongside more than 100,000 active crypto cards. Jupiter, MegaETH and Sui have also been named as projects using versions of the approach.
This infrastructure strategy could give Ethena additional routes to increase collateral and fee-generating activity without relying solely on direct USDe issuance. It also increases the number of products whose stability and yield mechanics may depend on the same underlying hedging framework.
Standard Chartered’s $40 billion forecast assumes that this model can attract substantially more capital despite lower funding yields and the memory of last year’s venue-specific depeg. Reaching the first $7.5 billion supply threshold would provide an early test: it would activate ENA buybacks and show whether USDe can expand on yield demand rather than token incentives.
To better understand yield and growth dynamics behind synthetic dollars like USDe, explore our guide on DeFi yield fundamentals.
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