Situating USDF in the Stablecoin Landscape

Comparisons with USDT, USDC, Ethena

Stablecoins play a pivotal role in the blockchain ecosystem, offering stability and bridging the gap between volatile cryptocurrencies and stable fiat currencies like the US Dollar. In 2025, the stablecoin market is set to mature and become a mainstream asset class. This growth will be spurred by clearer regulations, more cryptocurrency-friendly legislation and broader adoption. As decentralized finance (DeFi) gain momentum, the stablecoin market is evolving with both centralized and decentralized solutions to meet diverse user needs. Below, we’ll look into major stablecoins like USDT, USDC, and Ethena’s USDe—to see how they compare to USDF. We’ll highlight their differences, potential, and the broader implications for holders especially in market downturns.

1. Centralized Custodial Stablecoins: USDT/USDC

Centralized stablecoins like USDT (Tether) and USDC (USD Coin) have become the backbone of the stablecoin market due to their high liquidity, transparency, and widespread adoption. Both are pegged to the US Dollar and backed by fiat reserves managed by centralized entities.

USDT (Tether)

USDT, issued by Tether Ltd., is the largest stablecoin and the fourth largest cryptocurrency by market capitalization, with over $80 billion in circulation. Its extensive use in cryptocurrency exchanges, DeFi protocols and as a bridge currency in trading pairs makes it a highly liquid asset. Tether generated $13 billion group-wide net profits in 2024 and disclosed $143.7 billion of assets in reserve against $136.6 billion in liabilities, adding up to $7 billion of excess reserves backing its stablecoins. As stablecoins become a mainstream asset class, Tether usage is set to exponentially increase.

USDC (USD Coin)

USDC, issued by Circle, is another widely adopted stablecoin in the market with a market cap exceeding $30 billion. USDC is backed by reserve assets held in regulated financial institutions. USDC positions itself as a regulated and transparent option to attract institutional investors. Circle’s monthly transaction volume in November 2024 alone reached $1 trillion, pushing its all-time volume past $18 trillion. According to data from DeFiLlama, stablecoin issuers like Circle and Tether also took the lion’s share for on-chain revenue in December 2024. Circle generated $132.7 million in revenue, only second to Tether’s $532.1 million.

Revenue and Growth of Centralized Stablecoins

Revenue for centralized stablecoins like USDT and USDC is derived from several sources:

• Interest on reserves: Both stablecoins hold large amounts of fiat reserves, which are invested in low-risk, interest-generating assets like government bonds. These investments generate income for the issuers.

• Transaction fees: USDT and USDC also generate revenue through fees related to transactions on exchanges and their integration into DeFi protocols.

However, their centralized nature introduces several risks: Counterparty risk as they are controlled by a single entity whose solvency and integrity are critical; Transparency issues regarding whether these stablecoins are fully backed by reserves; Regulatory risk as being centralized means they are vulnerable to changes in the regulatory environment which may affect value and legality.

2. Decentralized Stablecoins: Ethena and DAI

Decentralized stablecoins like Ethena’s USDe and DAI operate using smart contracts and thus are not reliant on any central authority. These stablecoins aim to offer greater autonomy, transparency, and decentralization.

Ethena and USDe

USDe, issued by Ethena, is a synthetic stablecoin designed to provide stability through a delta-neutral hedging mechanism. USDe is backed by synthetic assets and composable with DeFi protocols, helping it to maintain its peg to the US Dollar. The platform also offers high yield opportunities of up to 18% APY by converting USDe into sUSDe.

DAI

DAI, issued by MakerDAO, is a decentralized stablecoin that is collateralized by a mix of cryptocurrencies such as Ethereum. DAI maintains its peg to the US Dollar through a decentralized system powered by smart contracts on the Ethereum blockchain. Collateral is stored in Collateralized Debt Positions (CDPs), or vaults, and DAI is over-collateralized to account for volatility. MakerDAO also enables users to earn yield by participating in governance and utilizing DAI in various DeFi applications.

Revenue and Growth of Decentralized Stablecoins

• Ethena (USDe): The main revenue for Ethena comes from its DeFi ecosystem, where holders participate in liquidity provision, staking, and yield generation.

• DAI: The MakerDAO ecosystem enables holders to lock collateral into smart contracts to mint DAI. MakerDAO also generates revenue through fees and governance tokens, allowing holders to participate in the protocol's decision-making and share in its growth. DAI is widely used across DeFi protocols, contributing to its growth and adoption.

Both Ethena and DAI have seen considerable growth due to increasing demand for DeFi. As DeFi matures, decentralized stablecoins will continue to play a crucial role in providing liquidity and stability to the ecosystem.

3. Ethena's Model and its Limitations During Bear Markets

USDF’s model is most similar to Ethena’s USDe in offering high yield opportunities. However, USDe’s model has certain limitations during market downturns, especially when negative fee rates become prevalent in a bear market.

Challenges During Bear Markets

Ethena’s reliance on high-risk strategies like synthetic assets may expose it to more volatility, making yield generation unsustainable in prolonged market downturns or during periods of long-term negative fee rates. This can result in yield losses, as the synthetic asset positions become more vulnerable. Additionally, the high yield offered during bull markets can significantly reverse during bear market conditions, leading to reduced returns.

USDF’s Bear Market Resilience

Astherus’ USDF addresses this issue by integrating decentralized stablecoin strategies while incorporating advanced risk management to deal with market volatility. During negative fee periods or bear markets, USDF will look to diversify its revenue streams such as integrating DAI lending strategies. This could look like leveraging DAI’s collateralized lending platform, allowing for a more stable return during market stagnation or downturn.

A multi-strategy approach including DeFi lending and synthetic asset exposure ensures that holders can continue to earn rewards and remain resilient against market downturns. This diversified strategy helps hedge against negative fee periods, ensuring that USDF holders don’t face significant losses.

4. USDF vs. Other Stablecoins: Key Comparisons and the Road Ahead

USDF combines the benefits of decentralized ownership and high yields, giving it a distinct edge over centralized competitors like USDT and USDC. When compared to other decentralized stablecoins like USDe and DAI, USDF stands out for its robust risk management features and its ability to diversify income sources during adverse market conditions.

• Decentralized Nature vs. Centralized Custodianship: While USDT and USDC are centralized, offering stability and scalability, USDF introduces a decentralized mechanism for greater security and transparency.

• Bear Market Resilience: Unlike USDe, which is vulnerable to negative fee rates and prolonged market downturns, USDF can adapt by utilizing DeFi strategies like DAI lending to generate consistent returns, providing better stability for holders.

• Potential for Institutional Adoption: USDF's focus on decentralized mechanisms and the regulatory compliance of underlying USDT funds makes it an attractive option for institutional investors—who need both stability and regulatory assurance, setting it apart from other decentralized alternatives.