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BASIS TRADES? BASIC TRADES
Ethena's USDe combines TradFi boring & DeFi best
Austin Campbell
July 08, 2025
BLUF*
Ethena created a hedge fund strategy for everyone.
While the mainstream media writes obituaries for crypto (again), Ethena built out a $5.3 billion tradfi move that is so vanilla, the index funds look dangerous.
*Bottom Line Up Front
Good morning,
2015. JPMorgan trading desk.
Spot/Futures arb (a.k.a. the basis trade).
Buy spot → Short futures → Pocket spread
Trading Desk Head: "BOOOOORING"
Our Desks’ P&L: +$2.3M 😂
While everyone else chased moonshots, we had our desk print money with the most boring trade in finance: the basis trade.
Now Ethena's USDe lets everyone in on that. Let's dive in.
Best,
Austin Campbell
Teaching Blockchain & DeFi at NYU
Talking to institutions at Zero Knowledge
ZERO IN
Backing basis trading, longs pay for shorts.
→ A perp trader wants 10x leverage, so the basis trader provides it with no price risk.
→ APR the basis trader gets paid? ~10-20%.
BASIS TRADE (ETH)
Buy ETH + Bet against ETH = No price risk, collect fees
↗ ETH UP
Spot: +$500
Futures: -$500
Net: $0
↘ ETH DOWN
Spot: -$500
Futures: +$500
Net: $0
ETHENA / USDe
Ethena’s innovation? No PhD required. No $100M buy in. Just buy and stake one token.
Ethena wrapped everything that backs the back end of the basis trade into USDe.
Thus, giving everyone who wants to get in on basis trading the opportunity to.
→ When crypto traders want leverage, they use perpetuals and need funding.
→ Ethena extends it (at ~10% APR) adding ~3% from ETH staking
→ USDe holders receive all of that as returns.
$5.3B
Total Trading Value
10%
Annual Funding Rate
$530M
Flow to USDe holders
"Is this another UST?"
Everyone's thinking it. Let's kill this comparison.
VS |
PERSPECTIVES
Allow me a moment to flex here.
In April of 2022 I wrote a deep dive into why everything Luna/UST: design, economics, was nonsensical.
If I couldn't spot a perpetual motion machine with endogenous collateral, I'd be in the wrong line of work.
It should be way less impressive than it was.
But two weeks later, it blew up.
Ethena? Not even in the same category.
DAVID MORRIS
Strategies Gatekept → Stop Gatekeeping → Scale to All
PERSPECTIVES
As investment funds twisted their strategies into pretzels to justify high fees, Vanguard made its core focus index funds cheap and accessible for all.
At Stone Ridge, we democratized cat bonds, assets that are positively returning, uncorrelated with stocks or bonds (hurricanes don't care about the S&P)—and not for the elite hedge fund crowd—we put them in mutual funds, so your local RIA could receive the returns on hurricane risk.
Same playbook. Different decade.
ZERO OUT
BEST OF DEFI
BUILD BASIC. BUILD BORING.
Ethena took Wall Street's most mundane money-printer, the basis trade, and added DeFi back-end tech like smart contracts and stablecoins, to enable participation in the process for digital-natives.
USDe didn't revolutionize finance or the financial ecosystem, nor raise any new risks outside of custody and counterparty, all things that regulators understand.
Finance doesn’t need to reinvent the wheel. Financial inclusion ~10% on 5.3B = $530M going from only the Ken Griffins of the world to anyone with a Metamask wallet, is innovation on its own.
SMALL BITES
GENIUS
We discussed this last newsletter, and it’s likely to pass the House this week and then be signed into law by President Trump. Let the stablecoin wars begin!
PUMP DOT FUN
Pump dot fun both exploits and worsens the broad transition of asset speculation into pure gambling. Austin and David hate it, for related and complementary reasons. We swear about it in the long form.
WHAT WE ARE DOING
AUSTIN
Austin is advising a company called XSY that intends to take the Ethena-style basis trade and bring it to other forms of tokenized assets (including, perhaps, some tokenized real-world assets), further smushing tradfi and defi into a single giant wad of stuff called just finance.
DAVID
Please check out my other newsletter, Dark Markets, which is focused on financial malfeasance, crypto, and technology investment fraud. I’m also about to dive headfirst into covering the trial of Roman Storm, one of the developers of Ethereum anonymizing protocol Tornado Cash. Finally, my book “Stealing the Future: Sam Bankman-Fried, Elite Fraud, and the Cult of Techno-Utopia” is coming November 11th from Repeater Books. Preorders will be available soon!
1 To read more about the Ethena / USDe, click through to Zero Insights.
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