ChainCatcher reported that Lorenzo Valente, director of digital asset research at ARK Invest, discussed synthetic dollar protocol Ethena in a post, saying tokenized stocks are changing the landscape for ENA.
Valente said USDe supply previously bottomed at $3.8 billion and has now risen by about 30% to nearly $5 billion.
Funding rates and collateral mix
He said inverted or low funding rates in crypto had at one point forced more USDe collateral into off-chain yield sources such as Treasuries. During that period, sUSDe’s average annualized yield at times approached or fell below the Secured Overnight Financing Rate, or SOFR. He added that the protocol’s market cap had remained broadly flat for a long period, while open interest also capped the pace of expansion.
Tokenized equities as a new source of capacity
Valente said basis trading has rebounded to about 20% of collateral and is expanding quickly. He also pointed to the U.S. stock market, which he put at about $70 trillion in size and said has delivered average annual gains of more than 8%. In his view, persistent long demand in equities could support sustained positive funding rates, while lower volatility and lower hedging costs could improve the setup.
He said this marks the first time USDe has had a clear path to expand supply beyond $20 billion. Reaching $30 billion to $40 billion over the next 12 to 18 months would not be surprising, he added. In his framing, the limiting factor has shifted from crypto open interest to tokenized equity open interest.
Demand-side support
Valente also said Ethena’s infrastructure and operations have already been tested. He expects Ethena Pay to provide an additional push for USDe from the demand side, while chains, protocols, and treasuries that absorb USDe supply and recycling strategies stand to be the main beneficiaries.