⚠️The Past and Present of USDe: From Explosive Growth to a Big Dump in TVL, What Lies Ahead?

In the past year, USDe has been one of the few stablecoins capable of sparking "structural-level discussions" in the global crypto market. Its rapid growth has shocked industry insiders and led it to be regarded as a representative of the "RWA+DeFi new paradigm."

However, from the peak of 14.8 billion USD in October to the current 7.6 billion USD TVL, evaporating 50% of its volume in just a few weeks, has made the market truly realize for the first time: can this stablecoin model, which relies on leveraged cycles, withstand long-term pressure?

This article will provide a comprehensive analysis of the birth, growth, mechanism logic, rise and risks, current changes, and future potential of USDe, helping you clarify its "past and present."

🚀1. The Birth of USDe: A New Breed Between Stablecoins and Yield-bearing Assets

The core goal of USDe is not simply to imitate USDT or USDC, but to create a yield-bearing "stable asset" and to make its returns transparent and on-chain.

The project team Ethena proposed a key concept at the end of 2023:

"A crypto-native stablecoin driven by the ETH derivatives market, achieving stable value through hedging techniques."

The stability mechanism of USDe is not the traditional 1:1 US Treasury bonds, but:

Buy ETH or stETH with USDe minting funds

Then open an equal amount of short positions on perpetual futures for hedging.
Obtain positive funding rate (Funding Rate)
Earn staking rewards simultaneously

That is: support the stablecoin itself with ETH long gains + perpetual short funding gains.

This mechanism makes USDe the first "derivative-driven" stable asset in the market, essentially resembling an on-chain hedging strategy fund.

🚀2. Sudden Rise: From 0 to 14.8 billion in one year, an unprecedented growth rate

The explosion of USDe is largely attributed to one factor:

➤ DeFi leverage looping strategy (Looping)

Core logic:

Deposit USDe into Ethena to convert it into sUSDe

Use sUSDe as collateral to borrow USDC on Aave.

Then exchange the borrowed USDC for USDe.
Deposit it back to continue the cycle.

Because the yield of sUSDe once reached 15%-25% at the beginning of the year, even higher, while the cost of borrowing USDC on Aave is about 3%-4%.
As long as the yield is higher than the cost, the leverage cycle can be infinitely profitable.

So:
2x
5 times
10x
Some wallets even offer up to 20x leverage.

Mainstream arbitrageurs, quantitative funds, and institutions are starting to enter the market wildly.
This is the story of USDe in 2024:
A TVL miracle driven by leverage.

🚀3. The double-edged sword of the mechanism: the higher the yield, the more aggressive the leverage; when the yield drops, a wave of liquidations follows.

This structure inevitably leads to a problem:
It is not a deposit model, but rather a "yield-driven liquidity" model.

In other words:
Funds are not meant to "use USDe", but to "enjoy the returns of USDe".

Once the profit falls below the cost, arbitrage funds will immediately withdraw.

What is happening is this chain reaction of "fall in yield → deleveraging → big dump in TVL."

🚀Four, early 2025: TVL big dump by 50%, but usage increases.

According to on-chain data:
USD TVL fell from 14.8 billion USD in October to 7.6 billion USD
fall over 50% (shrink 7.6 billion USD)

But the strange thing is:

USDe on-chain transaction volume reached 50 billion USD (last month)
The average daily active users and usage frequency have instead increased.

This indicates:
The user structure of USDe is undergoing a fundamental transformation:

From "speculators pursuing leveraged returns → actual users and liquidity providers."

🚀5. Why did the TVL drop so quickly? (Core reason analysis)

1. The yield has明显下降

Currently, the sUSDe yield (APY) is approximately 5.1%.
The cost of borrowing USDC on Aave is 5.4%.

This means:

The leverage strategy is no longer profitable on a large scale, and arbitrage funds are actively closing positions.

2. The funding rate of the perpetual market has significantly dropped.

The returns of USDe are strongly dependent on:
ETH perpetual long pays short funding fee (Funding)
stETH's PoS yield

When the cryptocurrency market volatility weakens, and the Funding Rate drops to near zero, the yield structure quickly deteriorates.

3. Institutions reduce leveraged positions
Many institutions using 8-20x leverage have started to collectively exit after returns no longer support their strategies, leading to significant liquidations on Aave and a sharp decline in TVL.

6. The essence of USDe: What is it like?

Some people say:

Like UST? Wrong, UST is a Ponzi.

Like USDT/USDC? That's not right either, they rely on the yield of US Treasuries.

Similar to MakerDAO's DAI? Somewhat similar, but not as high yield.

In fact, USDe is more like:

"Tokenized shares of on-chain hedge funds driven by crypto derivatives."
Its stability comes from market depth, rather than external reserves.

Its strength and weakness completely depend on:

ETH futures market liquidity
Funding Rate equilibrium level
stETH yield performance

Therefore, it is a hybrid of "stablecoin + hedge fund."

🚀7. Future: The space and risks of USDe coexist

Despite the big dump in TVL, USDe did not "die"; instead, an interesting turning point has emerged.
1. Its usage is on the rise, not on the decline.
The continuous growth of on-chain trading volume indicates that it is gradually transitioning from a "speculative tool" to "real demand," which is a good thing for any stablecoin.

2. When the收益 stabilize in the range of 4%-7%, it is more sustainable.

High yields are unsustainable and will attract leverage;
Moderate returns are more like normal assets, which can attract long-term capital.

3. Institutions are starting to explore including USDe in their asset portfolios.

For example:
As an alternative to on-chain government bonds
As part of a hedging portfolio
As the underlying asset of the liquidity pool
There is a huge demand from institutions for "stable assets with transparent returns."

4. Long-term risk: Dependence on the ETH perpetual market

If the structural funding of the ETH perpetual market turns negative and maintains a negative value for a long time, the core logic of USDe will be challenged.

But from historical data:

ETH perpetual longs are mostly willing to pay for holding positions, with Funding being positive in the long term.

This is also the "fundamental logic" of USDe.

🚀8. Summary: USDe is moving from frenzy to maturity

If 2024's USDe is:
A bubble inflated by market sentiment and leverage

Then the USDe for 2025 starts to become:
A more rational, more sustainable product that is closer to the real demand for stablecoins.

The big dump in TVL is not the end, but a healthy "de-leveraging" process.

The future of USDe will depend on three points:

Can it maintain a yield central of 4%-7%
Can we reduce dependence on a single market (ETH perpetual)?
Can USDe become the underlying asset for real trading and DeFi protocols?

If it can complete these three steps, USDe will not just be an "experimental stablecoin," but may become:
The standards and models for on-chain yield-bearing assets, guiding the development direction of the next generation of stablecoins.
$USDE $ENA $ETH