Yield compression triggers 50% TVL drop in USDe despite rising onchain usage
Ethena's USDe saw its Total Value Locked drop by over 50% due to yield compression and unwinding leveraged carry trades.Summary
Ethena's USDe, a synthetic stablecoin yielding from perpetual funding rates, experienced a Total Value Locked (TVL) decline from $14.8 billion to $7.6 billion (over 50%). This contraction is primarily attributed to the compression of perpetual funding rates, which has caused USDe's APY (currently around 5.1%) to fall below the borrowing cost of assets like USDC on platforms like Aave. This made profitable leveraged carry-trade strategies—which involved repeatedly looping staked USDe (sUSDe) as collateral—unprofitable, leading to their unwinding. Despite this significant TVL drop, onchain usage remains strong, with over $50 billion in transaction volume last month, indicating the token retains utility even as speculative leverage decreases.
(Source：The Block)