Ethena Expands USDe Yield Market to Tokenized Equities with Binance Partnership

Ethena, a financial and crypto news writer, has announced that it will expand its yield market for USDe to include tokenized equities. This move marks a significant shift in Ethena's basis strategy, which was previously focused on crypto markets. By partnering with Binance, Ethena aims to leverage the liquidity of equity perpetuals to provide another source of basis returns.

The partnership will involve Ethena holding bStocks as the tokenized spot leg and shorting corresponding USDT-denominated equity perpetuals. This delta-neutral structure is designed to minimize directional stock risk while collecting funding paid by leveraged traders on the perpetual side.

Ethena's Risk Committee has been studying the rapidly growing market for equity perpetuals, which they believe is liquid enough to provide a new source of basis returns without adding substantial directional stock risk. The committee has also identified potential risks and recommended tighter position sizing around earnings and weekends, as well as limits based on open interest.

With this expansion, USDe's yield engine will no longer have to rely exclusively on crypto funding conditions, providing Ethena with a new opportunity set. However, the model only works while both legs remain sufficiently liquid, the hedge tracks closely enough, and the funding earned exceeds trading, financing, and execution costs.

Ethena has tested this framework on Binance's markets, which represented about $2.14 billion in one-sided open interest as of August 26. The company has also negotiated additional protections for bStock holders through a side letter with Binance.