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Hey all, happy Tuesday. Crypto opened the week in the red as investors await the Jackson Hole summit. Tom Lee isn’t particularly worried, though. BitMine purchased an additional $1.6 billion in ETH last week, now holding >1% of ETH’s supply. Meanwhile, Ethena’s USDe/Pendle points flywheel is pulling in billions with mid-teens implied yields. What’s priced in and where’s the real risk?
Crypto markets had a red start to the week, with BTC and ETH closing Monday down ~1% and ~4%, respectively. Meanwhile, the US major indices had a muted performance as investors anxiously await the Jackson Hole summit, scheduled for Aug. 21-23.
Although no formal policy decisions will be made at the symposium, keynote speeches often shape expectations and economic outlook. In this regard, the CME FedWatch tool is pricing an 83.6% probability of a 25 bps rate cut in September, the first of the year.
Source: CME Group
On the DATCO front, Tom Lee's BitMine (BMNR) disclosed on Monday that it now holds 1,523,373 ETH. The firm added 373,110 ETH last week, increasing its holdings by about $1.6 billion. BMNR now owns over 1% of ETH's supply, with Ethereum DATCOs in aggregate owning 2.39%. If purchases continue at the same rate as the past few weeks, Ethereum DATCOs could own a larger share of ETH's supply than the BTC currently held by Bitcoin DATCOs (3.39%) by mid-September.
To underscore the point of how fast BMNR is accumulating ETH, consider the following: It took Saylor 1,316 days (3.6 years) to accumulate 1% of BTC's supply, from MSTR's first purchase on Aug. 8, 2020, to March 18, 2024. For Tom Lee, all it took was, uhm, 40 days.
— Carlos
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Peeling back the onion
We’ve all seen the USDe chart as of late. It’s up and to the right, now crossing $11.4 billion in circulating supply. There are a few key reasons behind this, which aren’t fully reconciled with sUSDe’s 6-9% APY.
Looking under the hood, the USDe market on Pendle for the September maturity now accounts for over $3.4 billion in USDe, 30% of USDe’s circulating supply. Unlike sUSDe, USDe itself is not natively yield-bearing, and is intended to represent the value of $1. On this Pendle market, however, USDe liquidity receives a 70x sats boost from Ethena’s points campaign, and the YT buyers on this market are pricing the value of these sats at an implied APY of ~14%, a steep premium to the underlying APY of 0% and the benchmark yields provided by sUSDe or USDC supplied on Aave. As the price of ENA has risen from $0.25 at the start of July to $0.67 today, the expected value of ENA distributions from sats has risen along with this.
Herein lays the flywheel points farming. Spend on growth with “points”, making USDe more attractive on Pendle. The USDe supply grows, accelerating top line metrics for Ethena. The growth in the top line leads the liquid markets to price ENA higher, raising the expected value of ENA distributions through points. As the market raises the implied valuation on points, the USDe supply continues to grow to crowd out this now 14%-16% implied yield, continuing the flywheel. Over $1 billion of USDe has been added to this market since last week.
Going one level further — as the market raises the implied valuation of the points, the fixed yield on the USDe-type PTs is lifted as well, making them more attractive for looping. As discussed last week, these instruments have shown profound utilization rates on Aave, which now holds over $4 billion in PTs, with borrow capacity and LTVs completely maxed out. As leverage across these instruments is continually dialed up, risks of an unwind continue to amplify. For more thorough reading on this matter, check out our recommended reading on this topic below.
— Luke
In this episode, we’re joined by Pendle co-founder TN to discuss the launch of Boros, a funding rate trading protocol. We dive into launch performance, liquidity and risk management, onboarding market makers, potential market expansions, integration opportunities and vault products. TN also covers Pendle v2 growth, DeFi partnerships, liquidity durability, cross-chain deployments, token model considerations and future plans for scaling both Boros and Pendle v2.
Chaos Labs published a risk analysis examining the growth and contraction cycles of USDe, with a particular focus on the effects of the contraction phase on Aave. It explores how Aave’s role in supporting Ethena’s expansion can amplify risks during a contraction, identifies the key mechanisms and triggers that could lead to a deleveraging cycle and stress-tests Aave’s resilience to scenarios involving USDe and PT unwinding. By proactively understanding these dynamics, Aave governance and risk teams can better manage the cyclicality of high-growth protocols like Ethena, leveraging their composability while minimizing the potential for systemic instability during downturns.
Filippo Armani, data content creator at Dune, explored how crypto has evolved into a practical financial tool, used to save, send and spend in everyday life in Latin America. To navigate the region’s diversity, he frames his analysis around four pillars: exchanges, stablecoins, on-/off-ramps and payment apps. While not exhaustive, this report is a first step toward a shared, transparent data-backed view of crypto usage across Latin America.
It’s the summer of DATs and the party is going strong.
But when October rolls around, everyone will be looking to DAS: London to hear from these meta-defining voices on where things stand and where they’re headed.
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