Who do you think ranks third among stablecoins?
USDT and USDC firmly hold the top two spots. The surprising third, however, isn’t DAI, FDUSD, or TUSD—but USDe, a newcomer launched less than two years ago.
As of September 23, data from CoinGecko shows USDe’s circulating supply exceeding $14 billion, second only to USDT and USDC. Excluding those two giants, USDe already commands nearly 40% of the remaining stablecoin market—squeezing older rivals and reshaping competition.
Why has this late entrant scaled so fast? Where do its high yields come from? What risks lie behind the growth? And what does USDe’s rise mean for the broader stablecoin landscape?
Source: CoinGecko
1) From $0 to $14B: USDe’s “Non-Linear” Rise
The stablecoin sector has long been one of crypto’s most profitable arenas.
Take Tether, for example. Its “money-printing” ability rivals top centralized exchanges. According to Tether’s Q2 2025 attestation, it held more than $127 billion in U.S. Treasuries (up about $8 billion from Q1) and generated $4.9 billion in net income for the quarter, $5.7 billion in the first half of the year—all with a team of only around 100 people. Its margins and efficiency are astounding, exceeding those of many CEXs or even Web2 financial giants.
However, at this lucrative table, most players besides USDT have struggled in recent years:
- USDC was hit hard by the 2023 banking crisis and a temporary depeg; its recovery remains incomplete.
- DAI, after MakerDAO’s pivot, became increasingly “USDC-like,” and growth has plateaued.
- TUSD and FDUSD enjoyed brief spurts but failed to change the rankings.
Source: Ethena
Against that backdrop of stagnation, USDe took a very different path—one that looks almost non-linear.
Launched in November 2023, USDe’s market cap grew from zero to $14 billion in under two years. It experienced only two notable pullbacks, each followed by quick recoveries. Since July, its supply has nearly doubled in just two months, fueled by deep integrations across major CEXs.
Zoomed out, the line looks like a near-straight ascent—driven by a powerful “high-yield flywheel” combining staking returns, collateral utility, and a compelling Delta-neutral narrative. In a mostly zero-sum market, that mix helped USDe break out as one of the most controversial yet closely watched newcomers.
2) Breaking Down USDe: Where the High Yields Come From
The feature that grabs attention is USDe’s yield. Users can stake USDe as sUSDe to earn the protocol’s full return stream.
According to Ethena Labs, the annualized yield for sUSDe is around 7.8%, and at times it has even topped 20%. So, how does it work?
First, what USDe isn’t: unlike UST—an uncollateralized algorithmic stablecoin—USDe is fully collateralized and maintains price stability through a Delta-neutral strategy. It’s essentially the real-world implementation of the “Satoshi-Dollar” concept proposed by BitMEX founder Arthur Hayes in his 2023 essay Dust on Crust.
Source：BitMEX
Two core yield sources
- LSD staking yield — collateral such as ETH or stETH naturally earns about 3–4% per year.
- Funding-rate income — USDe earns additional yield from short perpetual futures opened on CEXs as hedges. When funding rates are positive (as they often are in bull markets), shorts receive payments from longs.
These two together form the basis of the Delta-neutral construct. The system holds spot ETH/BTC (long +1 delta) while shorting an equal notional amount in perpetual futures (–1 delta).
The positions offset each other—net delta ≈ 0—keeping total portfolio value stable while collecting funding income.
Source: Ethena
Example:
Assume BTC = $120,000. A user deposits 1 BTC; the system buys 1 BTC spot and opens 1 BTC short perp.
- If BTC falls to $100,000 → spot loses $20k, short gains $20k → total $120k.
- If BTC rises to $140,000 → spot gains $20k, short loses $20k → total still $120k.
The collateral value stays stable, and the short hedge keeps earning funding. Combined with LSD staking yield, this creates the attractive APY that fueled USDe’s adoption.
3) The Shadows Beneath the Halo: USDe’s Risks and Debates
USDe’s design is elegant—but not without risk. Market concerns cluster around several key points:
- Funding-rate risk. The model depends on positive funding. If markets flip bearish and funding turns negative for extended periods, shorts must pay instead of receive, eroding yield and potentially stressing the peg.
- Centralization & custody risk. Collateral and hedge positions sit with multiple centralized custodians and CEXs. Diversified as they are, any major exchange failure or hack could directly impact backing.
- Liquidity & execution risk. During extreme volatility, Ethena must rapidly rebalance large spot and futures positions. Thin liquidity or slippage could break Delta-neutrality.
- LSD basis risk. If collateral such as stETH depegs from ETH, hedges no longer align, exposing the system to losses.
Bottom Line
USDe’s rapid ascent reflects the market’s search for a high-yield, capital-efficient, decentralized dollar after the fall of pure algorithmic coins and amid tightening regulation on centralized ones.
In practice, it offers a new blueprint for a synthetic dollar—collateral-backed, hedged, and yield-bearing.
For users, the returns are tempting—but understanding the distinct risk model is essential. As on-chain finance consolidates around a few core assets, USDe will remain a project worth watching closely.