How far can USDe’s yield scale as Ethena targets RWA perps? Examining…

Ethena’s yield product, USDe, will receive another expanded collateral backing from basis on equity perpetuals (perps). 

According to the project, equity perps, also known as RWA (real-world asset) tokenization perps, have grown 10x to $6B in Open Interest since March. 

The project added that the RWA perps market could grow 100x bigger, offering scalable basis yield opportunity that’s not tied to the cyclical crypto market. 

The underlying asset base is >$150 trillion compared to ~$2.5 trillion of crypto, making this the most scalable extension of the basis allocation to date. We expect RWA perpetuals to eclipse crypto allocations in USDe’s backing within 12-24 months.

The protocol expects its RWA perps backing to outpace crypto basis in a year or two. Currently, most of the collateral backing (32%) is in liquid stablecoins (e.g USDT, USDC). DeFi lending is the second largest reserve category with a 31% share across Aave and Morpho. 

Ethena’s aggressive USDe diversification

Basis trade involves locking a spread between the spot price of an asset and its futures contract (in this case, perps).

But the strategy only works during the bull market. At the height of the 2024-2025 bull run, USDe market supply peaked at nearly $15B with over 80% in yield. But the supply contracted to $4B and yield slipped below 0% in the crypto winter. 

To diversify away from the cyclical crypto market, the project started with traditional credit (powered by Janus Henderson). Currently, this category accounts for 12% of the USDe backing. 

The latest RWA perps plan, set to be deployed in the next few weeks, would mark the second wave of diversification. 

Speaking on why it delayed USDe expansion in RWA perps, Ethena founder Guy Young said, 

We took a cautious approach to what was a nascent market and waited until we saw deep, liquid markets with a data history we could study before moving into the opportunity at scale.

Guy added that the segment is “one of the very few 100x left” and could surpass global crypto’s volume and Open Interest (OI) in 24 months. 

Compared to its main yield rival, the short-term U.S Treasury bond, USDe offered a 1.6% spread. In short, one would expect more yield from USDe than U.S T-bills, before factoring DeFi security risks. 

Ethena has been aggressively upgrading its ecosystem ahead of the next bull run. Whether this round of yield diversification will boost demand for USDe remains to be seen. 

Final Summary

• After expanding USDe yield backing into traditional credit, Ethena now eyes a 100x basis trade opportunity in equity perps 
• Ethena founder said that they delayed the RWA perps expansion to allow the nascent market to develop deeper liquidity