ARK Researcher Sees USDe Reaching $30 Billion to $40 Billion

ARK Invest digital assets research director Lorenzo Valente sees tokenized equities opening a path for Ethena’s USDe to grow beyond $20 billion in supply, with $30 billion to $40 billion within 12 to 18 months a possibility that would not surprise him.

USDe supply has climbed to nearly $5 billion after reaching a low of $3.8 billion, a recovery of about 30%. Its growth had been constrained when crypto funding rates were low or negative, shifting more collateral toward off-chain yields such as Treasury securities.

At one point, average annualized returns on sUSDe, Ethena’s staked version of USDe, approached or fell below the Secured Overnight Financing Rate, a benchmark for overnight borrowing secured by U.S. Treasury securities. Market capitalization had also remained relatively stable, while open interest limited expansion.

Basis trades now account for about 20% of USDe collateral and are growing quickly. The strategy pairs positions in related markets to capture differences such as funding payments.

Valente points to the roughly $70 trillion U.S. stock market and its average annual gains of more than 8% as potential sources of sustained demand for long positions and positive funding rates. He also cited lower volatility and hedging costs for equities than for crypto assets.

Tokenized equities could shift USDe’s growth constraint from open interest in crypto markets to open interest in tokenized stocks. Valente described this as a clear path for USDe to exceed $20 billion in supply.

Ethena’s infrastructure and operations have been tested, and Ethena Pay is expected to add demand for USDe. Chains, protocols and vaults that support USDe supply and looping strategies may benefit from that expansion.