How Ethena is Disrupting the $170B Stablecoin Market with Guy Young at KBW2025

Welcome. Thank you for joining, Guy. Um, good to have you back in Korea. Um, why don't we start with the just general um, you know, road tours where Athena is today. You know, how did you get started with Athena?

You know, how did you get conviction initially? you know you started this team at the toughest time of crypto you know off after collapse of many giants that were in the industry um could you share a bit of an early story

yeah for sure uh so Athena started around 2 and a half years ago now was kind of uh the bottom of the last bare market and I think um a perspective I always had was that kind of if you're going to build something you kind of had to do that anticyclically i.e you have to kind of build when everyone's leaving the space for dead and then you sort of see the fruits of that um come out when when people sort of return to the market. So it's kind of what we did and I think uh the timing was basically just around when Luna had collapsed at the back end of last cycle and I think the very simple insight that I had was uh you know the demand for like a dollar with a yield uh it doesn't have to be 20% but some sort of return uh was clearly in the multi-billions and this is like a product that I think is widely sort of accepted now as one of the you know very few products that has like global product market fit within crypto now and uh you know the product that Athena had had put together was a sort of like idea of a tokenized cash and carry or tokenized basis trade and it had been something that I've been doing like personally on the side but had never really turned into like a product and I think the view that we had was there's clearly demand for this thing if you do this well it's a multi multi sort of billion dollar outcome on both the product and then uh the protocol itself and it felt like uh taking a slightly different approach to what we'd seen last cycle was going to be a big opportunity so uh yeah started around 2 and a half years ago now uh the product's been out for about 18 months and in that 18month period grew from zero to roughly $16 billion now across uh the two core products that we have and uh yeah excited to be here uh to chat through the whole thing. Awesome. Um at 16 billion today of supply and also you were the second fastest app to become $und00 million club uh in revenue.

um what were some of the unique design choices you guys made early on and still you know iterating that really made that fast momentum of growth that we see today with Ethereum.

Yeah. Yeah. So, I think um within stable coins or dollar based products, it's uh actually quite difficult to create products that look different, right? So, if you think about it, it's an extremely commoditized product where you only really have like two or three jobs. One of them is you need to be a dollar and if you dig deep from a dollar, then uh you don't really have like a business u pretty quickly.

Um the other one is you need to be liquid and when you're a startup to compete with the liquidity that you find and distribution that you find with people like te te tether and circle is extremely difficult obviously starting from zero and then the third axis that you can think about is uh return and uh that's where you can sort of experiment with what what else can you put within a dollar asset that isn't just a te bill that might be able to create uh sort of excess return and so uh yeah I think the derivative market within crypto was a pretty interesting untapped uh sort of source of cash flow So, if you take a step back and just ask yourself a question of um how many different places can you find $10 billion of annualized cash flow uh within crypto, there's only really kind of like three places. Um one is Binance equity. Uh the other one is Tether equity and then the third one is actually the basis that exists within the derivative market. So that market size is roughly $120 to $150 billion in open interest right now paying anywhere between like a 10 to 15% annualized yield. And uh for us it just seemed like a pretty insane mismatch where a lot of people are obsessed with this idea of yield within crypto but we don't really produce a lot of things that actually generate cash flow.

And this just felt like a untapped market opportunity to take that sort of source of income and try to put it in a format which we thought made the most sense which is sort of a dollar format. Yeah.

Yeah. um you know as a user and a person in the industry you know I thought something that's unique in Adina is that exchanges actually play quite a big role in the ecosystem and a lot of the largest exchanges around the world are um actively integrating um Etheina into their system um I think the big milestone was uh Binance obviously integrating you guys um what are some of their roles and you know why is it important um to have that collaboration with Etherecoin? Yes, I think um the relationship between Athena and exchanges is quite unique because uh obviously to actually create the product that we have, we rely quite a bit on the centralized exchanges because we need to, you know, tap into the open interest uh on their venues. Um but it's can be quite a symbiotic relationship, right? Because Athena brings flows, it brings open interest, it brings liquidity to their exchange, which is obviously very helpful to the largest uh derivative exchanges in the space.

But then equally exchanges have always been like the best distribution platform for dollars within the space, right? Um as big as you think DeFi is right now, I think it sort of pales in terms of like user numbers compared to like a 280 mil users that are sitting within um Binance right now. And if you look at the history of every successful sort of dollar issuer within the space, it's always been intricately linked between dollar issuer plus exchange. So, Pitfinex plus Tether or, you know, Tether and then all of the Asian offshore exchanges and then Coinbase plus Circle. And so, uh, the view that we had was like if you're going to succeed and actually grow this to multi-tens of billions of supply, you actually needed the exchanges to buy in and actually, uh, be behind what you're doing.

Um, and so we tried to be quite focused on that from day one where I think it was maybe a slightly different approach to other builders who start in DeFi where I think sometimes they just ignore the fact that C5 even exists. they sort of see it as like an enemy and we're you know DeFi against EI. I think from our perspective it had always been one of the most interesting distribution channels that we needed to try um you know align with. Yeah.

Yeah. Another um big milestone you guys announced was a DAT vehicle um of ENA. Um you know obviously the market today is quite overwhelmed with such a immense supply of a DAT product but um I think what you guys did was one of the most successful case for such a young altcoin um to have that vehicle um what's the role that you think that DAT will play in the industry and for the DNA ecosystem to be a value add um you know addition

yeah for sure um so I think maybe just taking one step back of like why did we even think this was an interesting thing to think about Um I think it became pretty obvious to us within the last 6 to9 months that we had like a bit of a flows issue within crypto and that uh alt specifically where there's a lot of VC capital in the space as you uh know uh but not a ton of sort of capital that sits on liquid markets to actually sort of take projects from TGE through the rest of the life cycle as they they sort of grow up. Um and then you had another problem which was if you looked at the way that circle traded after it um IPOed uh you know in the US um it traded up to like $60 billion valuation 300 times earnings and the demand that's sat within tradi for exposure to what I think is one of the biggest trends within like all of finance right now which is the growth of stable coins and digital dollars. Uh it became very clear that there was just not enough ways that could express a bullish view on stable coins outside of one single name. And so you really had like two problems here with one single solution which sat in the middle which was we're in crypto. We don't have enough flows that are actually here to buy the assets that we're producing.

There's too many coins and too little money that's sitting within the market now. And you can see that by the way that sort of alt BTC pairs have sort of performed in the last 3 to four years. And then you have another problem which is uh tried by one exposure to what we're doing. And they see this as like one of the biggest secular trends coming out of uh crypto. And so for us, all it really was was just that how could we create connective tissue between what we're focusing on uh which had been quite narrowly focused within uh crypto to date and actually just connecting that to pools of capital that's within um Tradfi.

And so you know I think a lot of the people who are uh pursuing these things are kind of like I'd say slightly short termist and trying to sort of grab a very what I view as like ephemeral premium to nav sort of thing that exists right now but I don't think makes any sense to exist within 12 months. for us it was really like it would be amazing to just have access to these investors even at one times nav like you don't have to believe all of these uh premiums would would sort of exist going forward um so that was yeah I guess the basic idea and then um maybe to just jump into one of the other points you're making which is how can this actually be involved with the ecosystem beyond just being a capital source for uh you know buying the underlying um I think one of the most interesting ways that people sort of try to justify um why why do these vehicles have like a reason to exist as to why should they trade at a premium to NAV? And one of the best answers for that is that you can create a capital structure within these vehicles which you cannot you know create by just holding the the underlying token itself. Um so I think one of the biggest themes that we're going to see within the next 12 to 24 months and we're starting to see the very beginning of it now is sort of an interest rate cutting cycle within the US and that has a very important impact I think on DeFi rates and the flows of capital between trady and DeFi. And what we saw last cycle was when rates went to zero, actually rates within crypto kind of went directionally up in the opposite direction.

And I think the intuitive reason for that is um as interest rates fall, people want to speculate more on crypto. They go further out the risk uh curve and uh to the longer tale of assets. And as they do that, they want more leverage and you know, interest rates within crypto pick up. The reason I'm giving all that context is because what these vehicles can actually do now is actually raise debt from Tradfi to come and deploy on chain and try create like a spread that they can actually monetize within the vehicle. And we think this is going to be an enormous opportunity not only just for like um you know Athena's DAT that you mentioned but actually Athena's product which is like is there a better product for Trad to be borrowing at 5 to 6% to then deploy into something within DeFi like USC at whatever 8 10 or 12 and that that income can actually be sort of monetized within the vehicle.

So I think this is potentially one of the biggest catalysts for DeFi generally as like a sector in the next 12 to 24 months and the more that interest rates fall within the US the more that that is more pronounced as an opportunity. Yeah.

Awesome. Um you know Hash and I have been fortunate enough to be ambassador uh in Athena early on and been working with you in the past years and I think our initial you know vision and excitement in Athena was really the you know precise PMF uh into the D5 market and also you know the great execution you guys had on the go to market exchanges and so on. Um but I've been noticing that you guys' new primary growth in the vision has been providing ETNA products into traditional finance. Um I guess the DAT products are kind of the entry you know into that. Um could you share a bit more about you know what to come uh in the future as Adina is just going beyond crypto uh into the bigger market.

Yeah for sure. I think um this is one of the things that excites us most about the product which is if you think about who does a dollar with a yield appeal to it's like the retail person sitting in Southeast Asia or it's the biggest hedge fund in the world in New York a dollar with a yield is a product that sort of fits within everyone's personal portfolio or institutional portfolio as well. Um and then if you just look at like a very basic level of the metrics that we've seen out of like USD as a product uh in 2024 it averaged around 18% return on like zero volatility and then lifetime to date since we launched that number is around 13 14%. That's just a pretty crazy number when you put that next to what you actually see within trad singledigit sort of returns annualized basis um is a pretty impressive thing to sort of achieve there. So I think that the view that we have is that it it kind of comes from a place of frustration actually from my side which is um we've had this incredible tailwind this entire cycle which I think is actually the defining tailwind of the entire cycle which is like we're no longer saying the institutions are like coming they're basically here and they're deploying into ETFs they're deploying into stable coins and all these different products but in many ways like DeFi is actually being left behind with all of the trends that we've seen.

So even basic numbers of, you know, BTC versus 2021 or stable coins versus 2021, both of those metrics are up like 2x versus where they were in 2021. But D5 TVL until like a month ago was actually like 30% below the peaks of what we saw in in 2021. And so the view that we have is that we sort of tapped out the capital that we have within DeFi. We're sort of shuffling it between different chains or shuffling it between different apps, but we haven't had that like real inflow that came in to find and actually use our products. And so I think the view that we have is like we don't want to sit around and just wait for that to happen and hope that it does happen.

We want to actually just go deliver this product in a format that they can sort of digest. And I think that that takes many forms. So um it can be them coming in just you know on an individual basis into the product. It could be in ETPs and ETFs. So you know the the market for ETFs and ETSs on like fixed income or bond like products that's within the real world is enormous.

We're talking like trillions of dollars. and being able to take what we do and put it in a format that's easily digestible like that within Trady and like public vehicles outside of all the different things that we spoken about with DATs. Um again we just think is like a an opportunity that's like bigger than the entire product right now uh with with Athena. Yeah,

it's quite exciting. um you know as we wrap up you know what are some of your predictions on just general you know stable coin market today and also on Ethereum supply you know it's at about 16 billion today you know um and I think you're I remember reading your 2024 recap on amazing first year of operation and you guys been killing it 20 you know 25 you know maybe end of 26 you know what do you expect out of uh Etheina ecosystem

uh yeah whenever I say these numbers everyone always thinks it's like a slightly insane and uh or outrageous like clone but I think um it felt it really felt in the last few months that we've sort of reached escape velocity on the product where uh you just have weeks where just billions were flowing in and we didn't even know where it was coming from and I think it has a slightly different perception within the market now in terms of its safety lindiness and all those different pieces. Um I think we'd be quite disappointed if the product was like below 20 to 25 bill by the end of the year and I think below 50 billion within like a year after that. Um I think we'd be quite disappointed if we didn't uh reach that. Um yeah, I think the macro view that we have is that the um interest rate cycle that we sort of described there is really one of the most perfect backdrops that you could ever have for Athena where as interest rates are falling other stable coin issuers are starting to suffer quite a bit is like you know gross revenues falling down in line with the Fed funds. uh we think that Athena's product is kind of going to go in the opposite direction in terms of the rates that it produces and that just comes into a tailwind of like us reaching escape velocity at the same time.

So um yeah, I think 25 to 50 billion in the next like 2 years is kind of uh what we're trying to set ourselves uh internally. And then I think the stable coin market as a whole, you know, people throwing around numbers like 2 to 3 trillion in the next 3 to 5 years, I think that kind of makes sense. Um and I think uh perhaps one of the more uh or less consensus views that actually I think Tether is going to continue being as dominant as it is right now despite the entrance of of basically every ma major financial institution in the world coming to play within this market. Um so I think like my prediction is 2 to3 trillion but like tether itself becomes like more than a trillion dollar asset in the next uh 3 years which is sounds like an insane thing to even say while while saying

I mean all the predictions in the industry has been insane but you know um especially for Athena you've been executing it you know beyond the pace so um looking forward to all those you know to come to reality. Uh guy thank you so much for joining me during uh Korea blockchain week. Uh thank you everyone for joining us for the panel.

Thank you everyone. Cheers.

Thank you.