Ethena vs Usual: When 30% Yields Compete with 4% Safety

One needs bull markets. One needs incumbents to stay asleep.

TL;DR

Ethena’s sUSDe delivers 30%+ in bull markets but collapses to 3% when leverage dries up. Usual’s USD0++ offers steady 4–5% from Treasuries — but faces an existential question: why not just hold USDC? Neither dies, but only one maintains its narrative when conditions shift.

Image generated with Google Gemini (AI-generated illustration)

In March 2024, Ethena offered 30% APY (Annual Percentage Yield) on stablecoins. By August, when crypto leverage dried up, yields collapsed to 3%. Meanwhile, Usual delivered a steady 4.5% throughout. By September 2025, Ethena’s TVL (Total Value Locked) approached $6 billion, while Usual exceeded $1 billion before facing a major USD0++ depeg crisis.

This isn’t about which protocol is “better” — it’s about understanding which market conditions each model requires to survive.

Ethena’s challenge is cyclical: it needs bull markets to return. Usual’s challenge is existential: it needs USDC and USDT to never pass through yields.

One challenge is guaranteed to repeat. The other is betting on incumbents staying asleep forever.

How They Actually Work

Ethena: Capturing the Leverage Tax

Think of Ethena as a toll booth on the leverage highway. When traders want to long Bitcoin with 10x leverage, someone has to take the other side. Ethena does this systematically: users deposit USDC or ETH (Ethereum), the protocol stakes ETH for 3–4% yield (the boring part), simultaneously shorts ETH perpetuals to hedge price risk (the clever part), and captures funding rates when leverage demand is high (the money part).

In 2024, Bitcoin’s funding rate averaged 11% and Ethereum’s 12.6%. Combined with staking yields, sUSDe delivered 37% APY in early 2024. But here’s the catch: by late 2024, as funding rates declined relative to Treasury yields, 72% of Ethena’s collateral shifted to liquid stablecoins, down from 53% in BTC and 28% in ETH.

Translation: when crypto traders stop paying to go long, Ethena becomes a 3% staking product competing with 4% Treasuries.

Usual: Tokenized Money Market Fund

Usual is simpler — almost boring. It’s what happens when you put Treasury bills on a blockchain. Users deposit USDC, the protocol buys short-term T-bills and money market funds (MMFs), yield flows back to USD0++ holders, and the USUAL token gives you governance plus eventual revenue share.

The yield? Whatever the Fed sets. When rates are 4.5%, you get roughly 4%. When they drop to 2%, you get roughly 2%. USUAL token issuance is tied to USD0++ TVL, with emissions decreasing as the protocol grows.

But here’s Usual’s real problem: Tether holds over $157 billion in U.S. government securities, making it one of the largest Treasury holders globally. Why hold USD0++ when USDC and USDT could just start passing through yields directly?

Quick Comparison: The Core Differences

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The table tells the story: Ethena is high-beta, high-ceiling, high-risk. Usual is low-beta, capped upside, execution risk.

The Real Risks No One Talks About

Ethena’s Risk Isn’t Ponzi — It’s Cyclicality

Critics love comparing Ethena to Terra’s UST (TerraUSD). That’s lazy analysis. UST was algorithmic magic with no real backing. Ethena’s USDe became the fastest-growing synthetic dollar in crypto history, reaching $12.4 billion market cap in 18 months, and it did so with transparent, over-collateralized positions.

The actual risk? Sustained negative funding. In 2022’s deleveraging cascade, funding stayed negative for months. Ethena doesn’t “blow up” in this scenario — it just becomes a boring staking product earning less than RWA (Real World Asset) yields. The protocol survives. The investment thesis dies.

Currently only 43% of USDe is staked, down from 60%+ in Q1 2024 — when users don’t stake, they’re signaling they don’t trust yields to last. When funding normalizes (which it has), leveraged positions on Pendle and Aave unwind fast.

Usual’s Risk Isn’t Safety — It’s Irrelevance

In late 2024, Usual suddenly terminated the unconditional 1:1 redemption mechanism for USD0++ with no warning, causing immediate depegging and liquidations across lending protocols. The team later backtracked under community pressure, but damage was done. This wasn’t a mechanism failure — it was execution risk exposing governance uncertainty.

Beyond that incident, Usual faces the distribution problem. Yield-bearing stablecoin supply surged from $1.5 billion in early 2024 to over $11 billion by mid-2025. The space is crowded: Ondo’s USDY, Maker’s USDS, PayPal’s PYUSD, Aave’s potential sGHO — all offering similar Treasury-backed yields.

What’s Usual’s moat? If Circle or Tether flip the switch on native yields, USD0 becomes redundant overnight. USDC now drives 57% of volume on Binance following a December 2024 strategic partnership with Circle. That’s the distribution advantage Usual is fighting against.

2024–2025: What Actually Happened

Ethena’s Rollercoaster

sUSDe currently provides 6% APY, down from a 19% average during 2024. TVL doubled from under $3 billion in November 2024 to nearly $6 billion by early 2025, driven by recursive yield strategies where users leverage sUSDe for amplified returns on Pendle and Aave.

But here’s the uncomfortable truth: the growth isn’t organic adoption — it’s yield farming with leverage. Ethena’s December 2024 revenue hit a record $12 million in a single month. But according to Ethena’s public dashboard, 72% of collateral had already shifted to stablecoins rather than BTC/ETH. This tells you everything: when funding rates compress, even Ethena’s own mechanics signal doubt about sustained leverage demand.

The protocol works exactly as designed. But the market it depends on — persistent positive funding — is cyclical, not structural.

Usual’s Drama

Usual raised $10 million in December 2024 at a valuation backed by Binance Labs, Kraken Ventures, and Galaxy Digital. Strong institutional backing should have meant smooth execution. Instead, the abrupt change to USD0++ redemption mechanics in Q1 2025 caught liquidity miners off-guard, causing liquidations and accusations of bad faith.

The protocol survived, TVL recovered past $1 billion, but trust erosion matters when your entire pitch is “safer alternative to crypto-native yields.” You can’t compete on safety and then surprise users with redemption changes.

Token Value Capture: The Uncomfortable Truth

Understanding what happened in 2024–2025 matters because it reveals which token actually captures value — and which just captures narrative.

ENA: High Beta, Actual Cash Flows

ENA captures protocol revenue from funding rates and staking. When Bitcoin funding rates hit 19% and Ethereum 12% in July 2025, ENA holders benefit directly through eventual fee switch activation.

The fee switch — when protocol revenue starts flowing to token holders — requires five conditions. As of July 2025, four are already met — only missing a major CEX (Centralized Exchange) listing remains. Once activated, ENA becomes a direct revenue share play. This isn’t governance theater. It’s exposure to crypto’s leverage cycle with transparent cash flow attribution.

USUAL: Governance Theater or Real Ownership?

USUAL offers governance rights and claims on 100% of protocol revenue, with 90% of tokens allocated to the community. Sounds great. Reality? Those cash flows won’t materialize until the protocol reaches massive scale.

You’re betting on USD0 becoming a top-5 stablecoin (needs 10x growth), DeFi (Decentralized Finance) protocols adopting USD0 as base collateral (needs Ethena/USDC-level integration), revenue switch activating (needs governance approval), and fees exceeding operational costs (needs time). That’s a 3–5 year thesis, minimum.

ENA captures immediate cash flows tied to market cycles. USUAL captures eventual cash flows tied to market share battles. Both are legitimate — but one pays sooner.

Three Market Scenarios, Two Different Winners

Scenario 1: Leverage Cycles Never Die

Bull markets keep returning — they always have. Funding rates spike predictably during euphoria. Ethena captures these recurring premiums, accepting 70% yield volatility for 20%+ peaks. This is a bet on human nature: traders want leverage, and someone profits from that desire.

The evidence supports this view. Every crypto bull market since 2017 has seen funding rates spike above 15%. The pattern repeats because the structure hasn’t changed: retail wants leverage, and perpetual futures are the easiest access point.

Scenario 2: Rate Normalization is Permanent

Fed rates eventually drop to 2–3%, RWA yields compress across the board. Usual offers 2–3% versus Ethena’s 3% staking-only. But at that point, why not just hold USDC? This scenario only works if Usual wins distribution before incumbents wake up.

The challenge: Circle and Tether already hold hundreds of billions in Treasuries. They don’t pass through yields because they don’t need to — users accept 0% for convenience and liquidity. If they ever change that calculus, every RWA stablecoin becomes obsolete overnight.

Scenario 3: Market Segmentation (Most Likely)

Both models serve different risk tranches. Ethena = tactical overlay during bull runs. Usual = strategic base with stable yield. This is what TradFi has understood for decades: different instruments, different purposes.

Capital doesn’t choose between high-yield and low-risk. It allocates to both based on risk tolerance and market conditions. The mistake is forcing a binary choice when the market naturally segments.

My Take: Both Have Uncomfortable Ceilings

The honest truth? Both models have uncomfortable ceilings — but only one is fatal.

Ethena’s ceiling is market structure. Even at $6 billion supply, Ethena accounts for only 12–14% of Bitcoin, Ethereum, and Solana futures open interest. Scale beyond $10–15 billion means moving perpetual markets, not just riding them. At that point, you ARE the market — and your own hedging activity drives funding rates negative. This isn’t a flaw. It’s physics.

But here’s what matters: this ceiling is cyclical, not permanent. When the next bull market arrives (and it will), funding rates spike, and Ethena reactivates. The protocol survives bear markets at reduced yields, then captures explosive returns during leverage expansions. It’s a predictable cycle.

Usual’s ceiling is network effects. Stablecoins win on distribution, not yield. The total stablecoin market could reach $300 billion in 2025, but USDT and USDC will capture 80%+ of that growth. Usual needs a distribution miracle — and distribution miracles are rare when incumbents control exchange partnerships, payment rails, and regulatory relationships.

But here’s what’s different: this ceiling is existential, not cyclical. Circle and Tether hold $200B+ in Treasuries. The moment they pass through yields to users, every RWA stablecoin becomes obsolete. Not reduced yields — obsolete. There’s no “waiting for the next cycle.” The entire thesis collapses overnight.

Neither protocol is “dying.” Ethena will activate every bull cycle when leverage returns. Usual will compound slowly if it survives the competitive gauntlet. But only one has a guaranteed recurring catalyst. The other needs a miracle.

Miracles are rare in markets with network effects.

Conclusion

Ethena = leveraged bet on recurring bull markets. Usual = leveraged bet on stablecoin monetization shift.

Both survive. Both serve different capital pools. But only one has a guaranteed recurring catalyst (leverage cycles). The other needs to win distribution before incumbents wake up.

2025 will clarify which bet matters more: Will crypto markets sustain structural leverage demand? Or will distribution moats crush yield innovation?

Place your bets accordingly.

Disclosure: Independent analysis. Not financial advice. Do your own research.

Data: Ethena Labs, Usual Money, DefiLlama, Messari, Kaiko Research, CCN, PANews