Ethena Q2 Mining Yield Analysis, 400%+APY Is Not a Dream?

Originally written by Donovan Choy, former analyst at Bankless

Compilation: Odaily Azuma

*Editor’s note: Earlier this month, USDe developer Ethena Labs announced the launch of the second season of Sats, a new event that will support BTC in conjunction with Ethena and is expected to run until September 2 (5 months long), or until USDe’s supply rises to $5 billion, whichever comes first. *

*As the most concerned stablecoin project in the market today, Ethena Labs’ popularity has peaked with ENA’s TGE. With a total FDV value of more than $13 billion, the most efficient way for users interested in participating in the project is to earn subsequent ENA rewards through the Season 2 event Sats, in addition to buying ENA directly in the secondary market. *

*This article is a detailed analysis of the operation and potential yield of the three mining strategies of low, medium and high in Stas activity by former Bankless analyst Donovan Choy, compiled by Odaily Planet Daily. *

Ethena’s first season campaign, Shards, lasted six weeks, with top Miners such as Defi Maestro reaping eight-figure profits from the first campaign.

If you missed the Season 1 event, it’s still time to participate in the Season 2 Sats, and while the Pendle pool is getting close to being full, you still have a chance to participate.

In the following, we will analyze three different Ethena mining strategies and their potential returns.

Before we begin, let’s take a brief look at the basic concepts involved in these strategies.

• First of all, Ethena is a issuance protocol of USDe, a synthetic dollar stablecoin that generates its own income. When you buy USDe during the Season 2 event, your Address automatically accumulates points (sats) that will determine the amount of ENA rewards you earn during the Season 2 event – ENA is Ethena’s governance token, which has a whopping $14.3 billion in FDV at the time of writing.
• Secondly, Pendle is a yield splitting protocol that splits a Token with its own yield (such as USDe) into “principal Token” (PT) and “yield Token” (YT). PT allows users to maintain independent principal exposure, while YT allows users to maintain independent income exposure. Since YT does not contain principal, the value of YT will gradually move towards zero on the maturity date. long wick candle the strategies that will be mentioned in this article, we will also focus on YT.

In the case of this article, USDe currently has an APR yield of 17%. So when you buy USDe YT Token on Pendle, the YT Token only carries 17% of the yield value and the points offered by the underlying protocol (Ethena).

• Third, Mantle and Arbitrum are both Layer 2 networks, and Pendle has been deployed on these networks in addition to Ethereum.

With these basic concepts in mind, let’s take a look at the three mainstream mining strategies in the Season 2 event:

• Low risk: hold USDe on Ethereum (get 5x sats per day), or lock it for at least 7 days (get 20x sats per day);
• Medium risk: Buy USDe YT at Pendle;
• High Risk: Lock up ENA to get a yield bonus and buy USDe YT on Pendle with the same amount of funds.

Estimated total active STAS in Q2

To calculate a specific potential return, we need to first answer a key question – how many SATSs long will be distributed by the end of the second quarter, and based on this crucial answer, we can quantify Airdrop returns and decide which strategies will deliver the best returns at the appropriate risk tier.

Note: We do not count USDe and ENA points issued to CEX Wallet.

We conservatively estimate an overall SATS rise rate of 40%, which means that by the end of the second quarter campaign (September 2, 2024), a total of 10.1 trillion SATS will be distributed. It is worth mentioning that if the USDe supply reaches $5 billion earlier, the second quarter activity will also end, but we think this is unlikely to happen early based on the current supply of $2.4 billion and the rate of rising.

Note: Data taken from DeFiLlama.

Low Risk Strategy: Holdings and lock USDe

Now let’s calculate the potential yield of just holding and locking up USDe, which is also the riskiest strategy in this article. Here are our two assumptions: Season 2 will distribute 5% of the total supply (assuming the same as Season 1); ENA’s FDV will be $20 billion at the time of the Q2 Airdrop, compared to $14.4 billion at the time of writing;

As shown in the table below, if you lock up 20,000 USDe today with 20x efficiency (with 130 days left in the second season), then you will make a profit of $5,186. This means a ROI of 25.93%, which translates to an annualized APR rate of return (APY) of 72.45%.

Unlike the follow-up strategy, this strategy doesn’t involve Pendle, and you can keep your entire stake.

Medium Risk Strategy: Pendle YT

Now let’s take a look at the medium-risk strategy to leverage Pendle’s USDe YT on Ethereum Mainnet to earn sats.

For the same $20,000 fund (but the difference is that the term will be 92 days because the Pendle pool will expire), the expected earning of ENA will be about $43,710, and the net return after deducting the principal will be about $23,710 (the value of YT will be tilted to zero at expiration, so you will lose $20,000 of stake), which is about 4 times that of the first strategy.

Under this strategy, the ROI is expected to reach 118.55% and the APY is expected to reach 331.22%.

It is important to note that the calculations in the table below are based on the current leverage ratio of the Pendle market, and the real-time leverage ratio of YT is subject to market demand and expiration date.

If you don’t choose Ethereum Mainnet and instead operate on the Pendle pool on Arbitrum, you can expect a slight drop ROI and APY, dropping to 114.96% and 321.18%, respectively. The reason for this difference is actually due to the difference in the real-time leverage ratio of YT on Ethereum Mainnet and Arbitrum.

You can do something similar within a Pendle pool on Mantle or Zircuit, but expect some variation in the data.

High-risk strategy: Lock-up position ENA, plus YT

Finally, let’s take a look at the riskiest strategy with the highest potential returns, which splits the stake 50:50, with half of it locked up in ENA and the other half used to buy USDe YT in Pendle.

This is because Ethena offers additional yield incentives to users who “lock up 50% of the total value of their USDe Holdings”, which will increase your total rewards in both pools by 50% by holding YT-ENA and YT-USDe in the same Wallet.

This may also be the strategy adopted by the most savvy YT traders, who may have made the most of the Airdrop rewards they earned in Season 1 in order to earn higher sats accumulation efficiency in Season 2.

As shown in the table below, this strategy (deployed on Arbitrum) yields the highest payoff – 162.56% expected ROI and 454.17% expected APY, but in turn takes on higher risk by locking up ENA.

Note: The USDe pool is in Arbitrum and the ENA pool is in Ethereum Mainnet.

Last but not least, if you choose a strategy that leverages Pendle YT, you need to pay attention to the real-time leverage. When the market is selling YT (which is more likely to happen closer to the expiration date), leverage will increase and vice versa. Although real-time leverage will continue to change based on the conditions of the YT market, when you buy YT, the leverage of the long wick candle on your own position will no longer change and will continue throughout the Holdings period.