Bitwise President Explains Why He’s Curious About Ethena

Bitwise President Teddy Fusaro is showing a keen interest in the latest stablecoin sensation, Ethena (USDe). In a Twitter thread on April 10, Fusaro praised the protocol’s mechanics, stating that USDe could potentially be the fastest-growing USD-denominated asset in the history of crypto. While Bitwise is widely known for owning various crypto funds, including a popular Bitcoin spot ETF, they currently have no investments in Ethena. Fusaro compared USDe to an ETF, explaining that it operates similarly to one. The protocol accepts contributions from authorized participants (APs) and issues USDe tokens. These tokens are then invested in a pre-determined portfolio, consisting of Bitcoin, Ethereum, ETH liquid staking tokens, and Tether USDT. The portfolio is balanced by short perpetual futures exposure, resulting in a delta-neutral portfolio. However, what sets USDe apart is that the reserves generate yield through staked ETH and futures interest, which is then distributed to all USDe holders. This interest can potentially be significant on a large scale. In comparison, traditional stablecoins like USDT and USDC are backed by centralized reserves, with the profits retained by the backing companies and not distributed to holders. While USDe presents unique risks, including exchange counterparty risk and smart contract risk, Fusaro believes that any potential depegs or unwinds would not occur in the same manner as the Terra protocol’s TerraUSD stablecoin collapse in May 2022. USDe has seen rapid growth and immediate success, with its market cap reaching $2.36 billion, making it the fourth-largest stablecoin in circulation. Despite the uncertainty, Fusaro acknowledges the significant support that USDe has garnered.