# Ethena Labs Launches “USDtb” Stablecoin: A New Era in Digital Dollar Market

Ethena Labs ($ENA) introduced the “USDtb” stablecoin on December 16, 2024. This marks their second foray into the stablecoin market following the February 2024 release of the Synthetic Dollar, “USDe.” Since its inception, USDe has swiftly climbed to the fourth position in market capitalization, reaching approximately $4.9 billion, trailing only Tether (USDT), USD Coin (USDC), and Sky ($USDS).

# The Purpose Behind USDtb’s Launch
Although Ethena’s inaugural stablecoin has been a marked success, the launch of USDtb prompts several questions. What strategic intention does Ethena have in mind with this new stablecoin? And what vision does Ethena hold for the future with its stablecoin endeavors?

# Backed by Stable Assets: USDtb’s Foundation
USDtb stands out due to its stable backing by cash and cash equivalents. Ninety percent of USDtb’s reserves are invested in BlackRock’s Ethereum-based tokenized money market fund (MMF) “BUIDL.” BUIDL, known for its stability, primarily invests in short-term U.S. Treasury securities and repurchase agreements.

BUIDL issues ‘BUIDL tokens’ backed by the fund’s assets, maintaining a fixed price of $1 per token and distributing interest income from government bonds to investors in the form of BUIDL tokens. Consequently, holders of USDtb also receive a portion of BUIDL fund returns as interest. The remaining ten percent of USDtb’s reserves are held in USDC for redemption purposes. Ethena Labs ensures that USDtb-related metrics are transparently available on-chain in real-time.

Currently, the issuance of USDtb has surpassed $1.44 billion, indicating its rapid growth. The asset is fully collateralized, slightly exceeding a 100% collateral ratio. USDtb’s foundational stability and quick redemption capability, anchored by BlackRock’s BUIDL, suggest its prominent future within the digital dollar market.

# USDtb as a Complement to USDe?
A notable aspect of USDtb is its role as collateral for USDe, a seemingly unconventional arrangement where one stablecoin backs another. Understanding USDe’s delta-neutral strategy is crucial for comprehending this setup.

Users can mint USDe by collateralizing cryptocurrencies such as Ethereum, Bitcoin (BTC), and Solana (SOL). For example, when Ethereum is collateralized, it equates to a spot long position, while Ethena simultaneously takes a short position in the futures market corresponding to the amount of deposited Ethereum. In a bull market, funding fees from the short position help maintain USDe’s price stability at $1 while generating additional revenue.

This strategy, known as delta-neutral, combines spot long and perpetual futures short positions to achieve near-dollar price stability. Depending on market conditions, collateral can also include stablecoins and stETH (staked Ethereum).

However, in a bear market, short positions must pay funding fees to long positions, reducing overall returns and decreasing the interest accumulating in sUSDe. For instance, the recent cryptocurrency market downturn has significantly lowered sUSDe’s annual percentage yield (APY) from nearly 20% a few months ago.

During periods of rising interest rates, sUSDe’s returns tend to decline due to lower average funding rates. Conversely, USDtb benefits from sharing U.S. Treasury yields, increasing interest income. Combining these inversely correlated products helps stabilize interest income against macroeconomic headwinds. Ethena facilitates swapping USDe for USDtb for a fee, allowing users to diversify and stabilize their yields. In the current climate of delayed rate cuts and a bearish cryptocurrency market, USDtb emerges as a viable alternative.

# USDtb: Bridging TradFi and DeFi
Like other stablecoins, USDtb functions in various roles, including payments, asset trading, and collateral. It is designed for seamless integration and utilization across the DeFi ecosystem, centralized exchanges (CEX), and prime brokerage services.

As the stablecoin with the largest holdings in BUIDL, USDtb plays a pivotal role in promoting the growth of the real-world asset (RWA) tokenization market. It’s equipped with the necessary infrastructure to cater to both retail investors and traditional financial institutions (TradFi).

# Ethena’s Vision: The Convergence of Financial Systems
Ultimately, USDtb’s launch aligns with Ethena Labs’ broader goals. Ethena highlights the stark contrast between the $100 billion DeFi market and the $190 trillion traditional finance bond market. Ethena aims to bridge DeFi, CeFi, and TradFi, creating tailored products for institutional investors to attract capital flow and expand crypto assets into traditional finance.

Ethena’s vision for institutional investors centers on “yield-bearing dollar-based assets.” This motivation underpinned the release of the interest-earning stablecoin USDe, distinguishing it from mainstream stablecoins like USDT and USDC.

Additionally, Ethena is set to collaborate with Securitize, owner of BlackRock’s BUIDL tokenization platform, to launch a new blockchain, “Converge,” in Q2 this year. Converge, an Ethereum Virtual Machine (EVM) compatible blockchain, aims to provide a custom DeFi environment for both retail and institutional investors.

The network’s gas tokens will be USDe and USDtb, with plans to issue iUSDe for institutional investors to further integrate traditional finance and DeFi, drawing substantial capital flows on-chain.

Ethena’s ambitious vision extends beyond mere stablecoin issuance. By dismantling the barriers between DeFi and traditional finance, Ethena aims to channel capital flow into the on-chain ecosystem, highlighting a journey worth watching.