Ethena is further expanding USDe's reserve assets to include real-world assets. The company disclosed that its first assessment focus is on AAA-rated CLOs, and it plans to allocate $310 million to the Janus Henderson Anemoy AAA CLO Fund to reduce the reliance of yields on crypto market cycles.
The first target is AAA-level CLO.
CLOs are asset portfolios formed by bundling multiple corporate loans, which are then managed and tiered by asset management institutions. Ethena is focusing on the highest credit rating tier, namely the AAA-rated portion.
The project team stated that these assets are located at the top of the capital structure, have a low historical default rate, and possess strong liquidity, which better meets their requirements for reserve assets to have "smaller drawdowns and more stable returns".
Attempting to weaken the correlation with crypto market trends
USDe's current returns primarily come from funding rates in the crypto market. During market upturns, funding rates are typically higher, and USDe returns rise accordingly; however, when the market weakens, funding rates tend to fall, and profit margins are compressed.
Ethena believes that with the introduction of RWA, yields will be more influenced by short-term interest rates, credit spreads, and loan market structure, rather than crypto market positioning and sentiment changes. This means that USDe's yield curve is likely to partially decouple from crypto market performance.
Prior to this, Ethena had already included BlackRock's BUIDL in its reserve allocation. BUIDL is primarily anchored to US Treasury bonds, marking its first step into the RWA (Retail Asset Investing) sector. If it continues to increase its allocation to CLOs (Collateralized Lending Transactions), it means its reserve structure will expand from a single Treasury bond asset class to corporate credit-related products.
The project team emphasized its ability to control fluctuations.
According to data cited by Ethena, during the pandemic shock and high-interest-rate periods, the broader CLO market fell by approximately 8% and 2%, respectively, lower than the pullback in the S&P 500 and the broader credit market during the same period.
The project team also stated that if a drawdown of approximately 5% occurs, CLO's recovery time is typically between 5 and 8 days. Ethena uses this to illustrate that this type of asset may outperform highly volatile crypto assets in terms of volatility control and recovery speed.
However, whether demand for USDe will rebound due to such reserve adjustments remains to be seen. The report mentions that demand for USDe has declined significantly since October of last year. Ethena has also recently partnered with Coinbase and the Brazilian exchange Mercado Bitcoin in an attempt to expand its product offerings.
Additional information:Ethena had previously included BlackRock's BUIDL in its reserve allocation, which primarily provides on-chain dollar asset exposure through US Treasury bonds.
