After an unprecedented surge, the DeFi protocol Ethena was forced to weather a sharp setback: collapsing funding rates nearly halved the market capitalization of USDe, the protocol’s native stablecoin. Now Guy Young’s team is mounting a counteroffensive. With the new HyENA platform, Ethena aims to establish USDe as the default collateral for perpetual trading within the Hyperliquid ecosystem. After Circle’s token was already replaced by USDH on the “main” Hyperliquid, USDe on HyENA is expected to unlock entirely new possibilities.
HyENA reshapes the perpetual futures market
HyENA is a perpetuals trading platform built on Hyperliquid, where USDe is used as collateral. This allows users to earn native yield directly on their positions. Historically, perpetual traders opening long positions—except during brief periods of negative funding—were required to pay substantial fees. On HyENA, however, traders earn by using USDe as collateral.
The project explains it as follows: imagine opening a delta-neutral position on HyENA with a USDe long and a USDC short. In this setup, you earn on both sides — the long and the short.
It’s no coincidence that Circle’s USDC is mentioned as the short leg of the strategy. Ethena founder Guy Young has repeatedly emphasized in podcasts that Tether should be viewed as complementary, while Circle is a direct competitor. While USDT mainly satisfies offshore demand for tokenized dollar substitutes, USDC is positioned as a “clean” stablecoin for regulated exchanges, fintechs, and institutions — precisely the market USDe is targeting, but with one crucial difference: here, the interest revenue flows largely to users, not the issuer.
HyENA is the next milestone on the USDe issuer’s roadmap. In the hyperactive perpetual futures market — fueled in part by Hyperliquid — where traditionally “dead” collateral like USDC sat idly, traders can now use a token that generates yield on its own. This is expected to drive higher open interest, increased volume, and a positive flywheel for both Hyperliquid and Ethena, transforming HyENA into an innovative, capital-efficient venue that attracts new trading and investment strategies.
Why USDC users receive no yield
To understand why USDC holders earn little to no return, one must look at the model itself. Circle issues USDC — a stablecoin backed by highly liquid reserves such as cash and short-term U.S. Treasuries. For exchanges, brokers, payment providers, and institutional players, USDC serves primarily as a blockchain-based “digital dollar” designed for clean regulatory compliance and fast settlement.
Like Tether, Circle earns primarily from interest on the Treasuries held in reserve. But while USDe is a yield-bearing synthetic dollar, USDC and USDT — as “payment stablecoins” — fall under GENIUS regulations and are not permitted to pass interest income on to end users. USDC holders receive full regulatory clarity, but no share of the yield.
Anyone wanting to earn with USDC must deploy it into additional protocols—lending, staking, liquidity mining. These yields, however, come not from USDC itself but from additional activities with counterparty risk.
Ethena’s recovery after the crypto crash
The argument for aggressive USDe expansion recently backfired as its supply crashed. In bull markets, Ethena earns high funding revenues, but when sentiment turns negative, funding flips — forcing the protocol to pay for its short hedges. As a result, USDe’s yield fell from peak levels near 25% to below 4%.
From a high of nearly $15 billion, USDe’s supply fell to under $7 billion, according to DeFiLlama.
This dramatic collapse in yield triggered a mass unwinding of “yield loopers” — users who leveraged their USDe exposure multiple times through platforms like Pendle or Morpho. When borrowing costs suddenly exceeded the reduced USDe returns, these strategies became unprofitable, resulting in rapid liquidation of USDe loops.
Impact of U.S. rate cuts
While crypto market sentiment sits near bear-market lows, the Federal Reserve — with the end of Jerome Powell’s tenure — is entering a more dovish policy phase. U.S. President Donald Trump has repeatedly stated that the new Fed chair “will definitely lower rates.”
For Circle, this is a serious challenge: lower rates reduce the company’s main revenue stream. For USDC holders, nothing changes — they still receive no yield — but the stablecoin giant’s business model is likely to become far less lucrative.
Ethena, on the other hand, directly benefits from a looser monetary environment. When yields on safe assets like short-term Treasuries fall, high-yield DeFi products stand out more sharply. Rate cuts also tend to increase investor appetite for risk. As crypto markets recover, funding rates — and therefore USDe yields — are likely to rise again.
Investor takeaway
The upcoming rate-cut cycle is likely to favor Ethena while pressuring Circle. However, it’s far from certain that the USDC issuer will “lose” in the long run — too many variables influence this rivalry. A scenario where both stablecoin giants coexist is entirely possible.
For crypto investors eyeing ENA, current prices — despite ongoing sell-pressure from early-investor unlocks — may present an attractive entry. At least Ethena’s founder Guy Young sees it that way: in addition to protocol buybacks, he personally purchased approximately $20.4 million worth of ENA in October.
While many crypto founders rush to offload tokens early, Young is increasing his own exposure, strengthening his “skin in the game” and earning community respect. Now the only question is whether the market will eventually lift ENA’s price — otherwise, Young risks a double hit.
