First app to hit $1B in revenue? 📈

Ethena's recent wins...and future headwinds 📊

November 16, 2024

GM! Welcome to Milk Road PRO. The ‘WiFi router’ of crypto newsletters.

(We’re signal baby!).

The U.S. elections are over, and the outcome? A green portfolio!

Trump is set to become the 47th president of the United States, and Republicans have taken control of both the House and the Senate. 

Translation? 

• More regulatory clarity for crypto 

• A crypto-friendly environment 

• And a clear signal for the markets to surge

With central banks easing up and more liquidity flooding the markets, this is the setup we’ve all been waiting for. 🥳

Everyone’s expecting prices to go up, sure—but what about the other effects? Think about more people entering crypto, more onchain activity, higher trading volumes, and increased leverage. 

Yes, all of that is coming. And today, we’re highlighting one application that stands to benefit massively from it all. 

A token that we believe will outperform Bitcoin and most other tokens this cycle. 

Why? Because funding rates—the cost of leverage (aka: loans)—are skyrocketing. 

And for Ethena, a stablecoin issuer that provides yield based on funding rates – these high rates are like rocket fuel.

[

Source: Block Analitica, Sky Forum

Funding rates are trending up since the election and currently sit at 23.5%. This means Ethena will soon be able to offer over 30%+ yield to their $sUSDe holders—an incredibly attractive rate.

For comparison, $USDC and $USDT, the biggest stablecoins in crypto, currently provide a yield of – wait for it… 

0%! (How’s that for a competitive advantage??).

BTW: If you’re new to Ethena, we’ve got a detailed report explaining everything you need to know right here.

And just to put things in perspective…

The last project to offer a 20%+ yield on stablecoins was Terra Luna, and they managed to attract $20 billion in TVL!

And ok, yeah – Terra then famously collapsed to $0 (why’d you have to bring that up?). 

…but thankfully that’s something that won’t happen with Ethena (again, that’s something we explained in our previous report). 

The point we’re trying to make is: the interest in generating a high yield on stablecoins was proven by Terra. 

As for Ethena? It’s currently sitting at $3 billion in TVL with a sustainable strategy to generate substantial yield. 

And just look at that recent growth of **$**USDe!

[

Source: Coingecko

Since mid-October, their stablecoin supply has grown by $0.6 billion. 

Something big is cooking within Ethena, and we’re going to dive into it to make sure that you know exactly what that is and how to capitalize on it!

Here’s what you’ll learn today:

• Why Ethena is stronger than ever

• What their new product and potential Ethena chain are all about

• The role of the token $ENA

• What we’re not so thrilled about with Ethena

• Our final thoughts and investment conclusions on $ENA

There’s a lot to unpack, so let’s jump right in!

ETHENA’S KPI

Let’s kick things off by looking at their main KPI: the supply of their stablecoin - $USDe.

Ethena has most of their key metrics available in real-time right on their website. It’s a fantastic feature—and honestly, we wish every project did this! So go ahead, check it out yourself whenever you like!

Anyway, here’s a chart showing the $USDe supply over time.

[

Source: Ethena

Currently, $USDe’s circulating supply stands at $3 billion. Ethena currently ranks as the 4th largest stablecoin, right behind $USDT, $USDC, and $DAI/$USDS. 

The closest competitor is $DAI/$USDS from Maker, with a supply of $5.6 billion. 

But if you’re a curious person (and we know you are), you might have questions around everything that happened back in late June when the circulating supply started dropping from $3.8 billion. 

Well, the answer is…not much, really. 

Summer kicked off, people went on vacation, spent more time offline, and onchain activity naturally slowed down. But nothing product-related triggered it.

It’s totally normal for products to experience some changes with seasonality. We wouldn’t be surprised if this trend continues, with a dip in demand next summer as well. 

The key takeaway? Looking at this chart, we’re impressed that Ethena managed to handle such rapid success and growth after launch. 

It became the fastest asset to reach $3B in supply in crypto—ever. And as it stands today, everything seems to be back on the right track, with demand picking up once again.

But there was one major twist over the summer that’s worth digging into…

STRESS TEST FOR ETHENA

Japan's Central bank unexpectedly raised interest rates, sending shockwaves through the markets and sparking a full-blown panic. 

The Nasdaq dropped 7% in one day! And remember, this was in stocks, not crypto—so yeah, this was serious.

For all the skeptics out there, this was their chance to jump in and call out Ethena’s design, predicting it would crack under pressure. 

…so, what happened? 

drumroll 

Absolutely nothing. Ethena didn’t even flinch. They didn’t have to make a single adjustment—everything ran smoothly, as designed. 👏 

Take a look at the chart showing supply and price peg stability. Ethena held steady through the chaos, proving the critics wrong and showing the strength of their system.

(Aka this isn’t a Terra Luna 2.0)

[

Source: Ethena

A major macro shock like that, and we barely see a blip in Ethena’s supply. 

And even more impressive? The price stability. 

Ethena’s stablecoin didn’t experience any wild swings; it’s held within 1% of $1.00 since launch. 

That’s exactly the kind of stability you want to see as an investor.

Why does that stability matter so much? 

Picture this: that market shock spirals into something bigger, rattling everything, and suddenly you need to pull some liquidity from crypto. 

Now imagine logging in, only to find that for every dollar you deposited into Ethena, you’re only getting back 98 cents—or worse. 

For a stablecoin, that’s no bueno.

In a crisis, the last thing you want is to see your stablecoin wobbling. 

You want peace of mind that your funds are rock-solid, ready to go whenever you need them. 

That’s why Ethena’s stability is such a big deal! 👏

But stability alone is not enough. It’s Ethena’s yield that is going to drive serious demand!

ETHENA SUPERIOR YIELD

Remember all the hype around Real World Assets (RWA) onchain? 

Well, it’s real—we actually have real-world assets on the blockchain now. 

But here’s the kicker: today, about 90% of it is just wrapped U.S. Treasuries. 

(Not exactly the revolution we were promised!).

U.S. Treasuries are easily accessible on the blockchain, meaning Ethena has to offer higher yields to stay competitive and attract more demand. 

So, let’s dive in and see how successful they’ve been at doing just that.

[

Source: Ethena

Right now, Ethena’s yield is about 25% higher in absolute terms. 

So while U.S. Treasuries might give you around 4% right now (of course this depends on the FEDs interest rates), Ethena is serving up a juicy 29%! 

The best bit? That gap is likely to stay that significant for some time. 

As we’ve shared many times before, interest rates in the US are heading lower, which means the yield from The US Treasuries is too. 

At the same time, when rates go lower, funding rates tend to go higher (as more people invest and use leverage during lower interest rate environments). 

This means Ethena's yield of 20% or more is likely to remain at these levels for at least the next few months. 

So while your neighbor grumbles about only getting 3% on his savings account, you can just smile to yourself. 

Or maybe it’ll be the perfect opportunity for you to introduce him to the world of crypto. 😊

There’s no better way to get people on board than with a solid financial incentive. And with offerings this good, it’s truly a unique opportunity.

Lemme summarize all of that for you: 

Ethena isn’t just positioned to offer an unparalleled yield—it has also been stress-tested by the market, which is a huge confidence boost for any skeptical users out there.

…but that’s not all. 

They’ve been busy over the past few months, and in the next few sections, we’ll dive into everything they’ve been building to determine if $ENA is a solid investment or not.

(You’re going to want to see this).

INTEGRATIONS & PARTNERSHIPS

Ethena caught the attention of just about everyone in DeFi and quickly became integrated across the board. 

If you have a great product, getting integrated with other decentralized protocols like Maker or Aave isn’t too difficult. 

The real challenge is getting integrated on centralized exchanges.

For Ethena, It all started with Bybit.

Bybit, the centralized exchange with a whopping $16B in Open Interest (OI), has integrated $USDe as a collateral asset for trading perpetual futures (financial derivatives that enable people to use high leverage).

This means Bybit users can now earn yield on their $USDe while it’s being used as collateral—something that’s never been done before. 

Plus, they’ve introduced zero-fee trading pairs for $BTC-$USDe and $ETH-$USDe!

Why is this a big deal? Up until now, stablecoins like $USDT have been the go-to collateral for trading, but they don’t pay holders any extra yield. 

All the profits from using these assets as collateral have been kept by the issuers (e.g. Tether). 

💡In fact, there’s over $20B in USD-pegged collateral locked up in perpetual futures, capturing zero yield for holders.

It’s a win-win: 

Ethena gains more integrations and demand for their products, while centralized exchanges can offer yield-bearing collateral to traders—a much more attractive option than zero-yield assets!

Bybit was just the beginning—shortly after, Bitget, another major exchange, announced its integration as well. 

And most recently, the hottest and most popular decentralized exchange for trading, Hyperliquid, has submitted a proposal on the Ethena forum to integrate with $USDe too. 

To give you a sense of how big a deal Hyperliquid is – just take a look at its trading volumes and compare them to other giants in the decentralized exchange space. 

[

Source: Artemis

Hyperliquid, despite being the youngest player in the game, has already become a market leader, capturing a massive 35-45% market share.

With $1 billion in Open Interest (OI), Hyperliquid is a bonafide big dog in the space. 

As the first decentralized exchange—and market leader—to show interest in integrating USDe, this is a massive milestone for Ethena.

And while we’re on the topic of integrations, we can’t forget to mention Ethereal!

So far, all the integrations have been pretty straightforward—mainly just allowing users to utilize Ethena’s stablecoin.

But this integration goes much deeper. 

Ethereal isn’t just looking to use Ethena’s products—they want to integrate with Ethena’s entire infrastructure and the backend that powers those products!

To put it simply: Ethereal is building an exchange exclusively on top of the Ethena infrastructure, and they’re offering 15% of their tokens to $ENA holders.🥳

We’re still waiting to see the full implications and benefits of this initiative, but it’s a very positive sign that Ethena is attracting new projects to the ecosystem. 

The fact that Ethereal is choosing to build exclusively on Ethena shows real confidence in Ethena’s future success.

Finally, Ethena’s big integrations and the Ethereal initiative aren’t the only things happening—even larger players are showing interest in partnering with Ethena.

There are two major partnerships:

1️⃣ Ethena has partnered with EigenLayer and Ether.fi to introduce $USDe as the first dollar-denominated token that can be used as collateral for staking on EigenLayer. 

What does it mean for users? 

• Ethena’s $USDe will be available for deposits on Ether.fi, Ethena’s restaking partner, in exchange for a new Liquid Restaking Token (LRT) called $eUSD.

• This $USDe-based LRT ($eUSD) can be used on EigenLayer as collateral, creating a stable option for those involved in shared security.

We won’t be diving into restaking today, but you can read more about it here.

By holding $eUSD, holders earn rewards from multiple sources: 

• Ethena points

• Ether.fi points 

• EigenLayer points

• Restaking yield 

That’s a pretty compelling package. 🤑

Now, you might be thinking, "Whoa, partnerships with major players—this is awesome!" 

But hold on, there’s a partnership with an even bigger player, one that’s an order of magnitude larger.

This new partnership will lead to an exciting new product from Ethena.

ETHENA’S NEW STABLECOIN

2️⃣ Ethena announced plans to partner with Securitize for the launch of a new stablecoin, $UStb.

Hold up—we mentioned a really big player, and you’re probably thinking, “Who’s Securitize?” 

Well, Securitize is the crypto arm of BlackRock. And if you don’t know who BlackRock is, let us fill you in.

BlackRock is the world’s largest asset manager, overseeing a staggering $10 trillion. Yep, trillion.

In March 2024, BlackRock launched the USD Institutional Digital Liquidity Fund, known as BUIDL. 

Now, $UStb—the new stablecoin Ethena plans to launch with Securitize—will function just like a traditional stablecoin, and deploy its reserves into $BUIDL, the token underpinning BlackRock’s first-ever tokenized asset fund. 

But why? What’s the point? We mentioned earlier that having a stablecoin backed by U.S. Treasuries isn’t exactly groundbreaking anymore… 

Save that thought. We will brainstorm on it at the end of the report.

For now, the headline is: 

Ethena has been busy with a ton of integrations and partnerships. 

And let’s not forget—they’re also expanding to other chains. As of today, $USDe is live on Solana, Mantle (L2), and Blast (L2). 

Next up on the roadmap? Expanding to Arbitrum and Base.

It’s great to see that Ethena understands the importance of being available everywhere users are. 

And as if that wasn’t enough, they have something else cooking. How does “Ethena chain” sound to you? 😊

ETHENA CHAIN

That’s right—Ethena has already taken some initial steps toward building their very own chain.

Today, $ENA and $USDe holders can deposit their assets into vaults on Symbiotic (similar to EigenLayer). 

All the funds collected in these vaults will eventually serve as collateral to secure Ethena’s cross-chain transfers.

While these deposits aren’t securing transfers just yet—since Symbiotic isn’t live—these initial steps are clear signs that Ethena is serious about building its own chain.

This is all part of Ethena’s bigger plan: to scale $USDe as widely as possible, while positioning $ENA as the essential asset that secures the whole ecosystem. 

👉 As $USDe grows, the role and value of $ENA will grow right alongside it.

Ok, but is there any real utility for the $ENA token today?

$ENA UTILITY 

This question comes up a lot. And while the answer for Ethena is yes, we believe that early-stage apps should focus more on growth than utility—but that’s a topic for another day.

For now, it’s worth noting that Ethena’s farming program, Season 3, is still active. It started in September and runs till March 23, 2025. Here’s a quick rundown…

If you hold $ENA, here’s how you can earn the following rewards:

1. Stake $ENA to get $sENA — Earn 40x rewards/day + 2x Ethereal points.

2. Lock your $sENA — Earn 40x rewards/day + 3x Ethereal points.

3. Restake $ENA on Mellow/Symbiotic — Earn 40x rewards/day + Mellow points and/or Symbiotic points.

Plus, you can boost your $ENA rewards by 20%-100%. Here’s how it works—this is a smart way to align Ethena users with $ENA holders:

Let’s say you hold 1,000 $USDe or $sUSDe, worth $1,000. 

To qualify for boosted rewards, you need to stake at least 20% of that value in $ENA tokens.

So if today’s price of $ENA is $0.50 and you hold 1,000 tokens, that’s worth $500, giving you an $ENA-to-$USDe ratio of 50%. This means you get a 50% boost on your $ENA rewards!

Currently, there’s around $600 million worth of $ENA staked or locked, with 2.9 billion $USDe in circulation. 

That puts the staking ratio at about 22%. Is it just a coincidence that the minimum boost threshold is set at 20%? Hard to say!

But what we can say is that they obviously won’t reveal in advance how much supply will be allocated to Season 3, so people can’t game the system. 

That means we can’t tell you what the absolute best strategy is here. 

Now, with Season 3 ending in March, should we expect a lot of new tokens to hit the market? Should we be preparing for a major sell-off? 

Maybe. But that’s not the only supply overhang coming for Ethena.

$ENA TOKEN UNLOCKS

Between Q1 and Q3 next year, the circulating supply of $ENA is set to double—meaning a 100% inflation rate.

Please note that the incentives for Season 3, which ends in March 2025, are part of the Ecosystem Development unlocks.

[

Source: Ethena

Starting at almost 3 billion at the beginning of the year of 2025, $ENA’s supply is projected to reach 6 billion by Q3 2025.

That’s a pretty significant amount of new tokens hitting the market in less than a year. 

And there’s more: 

Ethena raised $14 million earlier this year at a $300 million valuation. 

Today, the valuation sits at $9.3 billion, meaning those early investors are looking at a 31x return. There’s a pretty good chance that some of them will be cashing out and taking profits.

At the same time, it’s no secret that these token unlocks are coming up, so there’s a chance it’s already priced in. 

We know how you’re feeling right now. 

You were getting more and more excited about Ethena as you read along…then BAM!

We hit you with the old “more than $1.5 billion worth of token unlocks are coming to the market over the next year”. 

(It’s a tale as old as time).

That’s a big number. It means we’ll need buyers with $1.5 billion in purchasing power just to keep the price steady where it is now. 🧐

It’s definitely not what you want to see as an investor... 

But before we all hit the panic button – let’s collect everything that we’ve just learnt, and share some final thoughts.

MILK ROAD THOUGHTS

Ethena caught our attention right after launch because we thought their product was genuinely solid. 

Later on, during the summer, we were especially impressed by how Ethena held up during a black-swan event—when the Bank of Japan unexpectedly raised rates, causing widespread panic and market shock. 

This could have been tough for Ethena, but we kept a close eye on $USDe’s performance and were really pleased with how stable it remained under pressure.

While we always believed Ethena’s design was rock-solid, it was reassuring to see it perform so well in a real-world stress test. 

Now that it’s proven its resilience, this stability could attract even more demand moving forward.

One of the strongest indicators of Ethena’s success—though hard to quantify—is the level of interest it has attracted from other players in the space. 

Ethena has rapidly expanded across the entire ecosystem, from DeFi integrations to major centralized exchanges. 

It has even reached beyond traditional crypto channels through partnerships with Securitize all the way to BlackRock. 

**This kind of widespread interest speaks volumes.**👏

And listening to Guy, the founder of Ethena, on various podcasts, he comes across as someone with a clear vision. 

So far, his leadership gives us a lot of confidence in Ethena's direction.

But maybe it’s time to take a look at the price chart for $ENA. 👀

[

Source: Tradingview

$ENA is now trading at $0.66, up 88% in the last 7 days. But it’s not all just because of the election.

An interesting topic popped up on the Ethena forum recently, catching the attention of investors. 

Ethena was asked whether they plan to implement protocol fees at some point, under what conditions they might do so, and whether any cash flows would go to stakeholders other than token holders.

Ethena responded quickly, clarifying that they do plan to introduce fees and are actively working on defining the conditions for when it would make sense to activate them. 

They also emphasized that all cash flow from these fees will go exclusively to token holders or the DAO—no equity holders, labs, or foundations will ever receive a cut of this revenue.

It’s definitely reassuring to get that confirmation from the team. But we’re really curious to see what conditions they’ll set for activating those fees.

Overall, we’re big fans of Ethena and the progress they’ve made. 

However, there’s a new trend that’s emerged over the past few months: the "low float, high FDV" narrative. 

It’s the idea that many tokens launch with a low circulating supply to keep prices high, only to be hit by massive unlocks down the road as early investors start dumping their holdings.

And Ethena falls into that category. 

So let’s set aside the circulating supply for now and focus on the FDV. To put this into perspective, here’s a chart showing the top 6 DeFi projects by fully diluted valuation (FDV). 

[

Source: Coingecko

With a current FDV of $8.2 billion, Ethena is sitting in the third spot, right behind Jupiter and Uniswap. 

And what do those two projects have in common? Their users are directly interacting with their platforms, serving millions of people.

Then there’s Ethena. Unlike Jupiter and Uniswap, Ethena isn’t a user-facing app; its goal is to become the most widely used stablecoin in the industry. 

But that means it doesn’t have direct access to millions of end-users in the same way. 

Ethena is more of an “infrastructure” product, focused on becoming a foundational stablecoin, while relying on other platforms to integrate and deliver its value to users.

With that in mind, Ethena’s valuation stands head and shoulders above the rest. 

Other similar projects like Jito and Raydium are sitting at about one-third of Ethena’s valuation. 

And it makes us reconsider whether Ethena might be overvalued.🤔

Here’s the TLDR: Ethena is set for massive growth over the next year, but it seems the market has priced in a lot of that potential, with Ethena valued at these high levels.😏 

Normally, we might consider trimming our $ENA position, but we believe Ethena is about to start generating truly insane revenue (it’s already happening under the radar) and offering an attractive 20%+ yield. 

So there’s still a chance that some of that growth isn’t fully priced in yet.

Think about it—an app generating the highest revenue in all crypto, combined with products that are gaining serious traction across the crypto community. 

That’s a powerful combo, one that could spark a new narrative and drive prices to sky-high levels.

If we had to bet on which crypto app will be the first to hit $1 billion in revenue, our money would be on Ethena. 

Plus, there’s always the potential for them to eventually switch on protocol fees, which would be a massive price catalyst too.

So, even though Ethena’s valuation is quite high and there are a lot of token unlocks on the horizon, we’re still holding onto it. 

We believe Ethena has a strong chance of riding the next big narrative wave, which could send the price soaring.

In the last cycle, we saw Uniswap reach a fully diluted valuation (FDV) of over $40 billion, proving that DeFi projects can hit massive valuations even with limited fundamentals. 

That’s why we believe Ethena could trade even higher at some point in this cycle—potentially doing at least a 5x from current levels. 

However, we know these sky-high valuations won’t last; once the bear market hits, Ethena’s value will likely drop significantly. 

Our goal is to be out of the position before that happens.

So, if you don’t currently own any $ENA, consider everything we’ve mentioned above. We don’t usually base our investment thesis on narrative, but in this case, it’s a key factor. 

Right now, $ENA only makes up 0.94% of our portfolio, but we believe it’s worth a small allocation in every portfolio.

We’d love to hear your thoughts! Please feel free to share any feedback or comments on our Discord.

Take care, and good luck!

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