Author: ArkStream Capital

We are pleased to announce that ArkStream Capital has invested an additional $10 million in Ethena in August 2025, reinforcing our long-term strategy following the initial investment of $5 million in December 2024. This increase is driven by our strong recognition of Ethena's ability to achieve structured breakthroughs in both product and capital markets simultaneously.

What strengthens our commitment is not only the explosive growth in data but also Ethena's institutional innovation in the capital markets.

The "Dual-Track" Flywheel

Over the past two years, Ethena has not only proven the product-market fit (PMF) of USDe but is also binding a purely crypto-native decentralized protocol with a capital vehicle configurable in the US stock market into a "dual-track" flywheel, completing what we call a critical leap to Capital-Market Fit (CMF). This is not for short-term arbitrage, but to connect protocol cash flows, governance, and external compliant capital into a reusable capital structure.

Equity Side (StablecoinX): Based on the merger with TLGY SPAC, the PIPE size has increased from $360 million to a total of $895 million (with the latest round adding $530 million), planning to list as "USDE" on Nasdaq. After the closing, the StablecoinX balance sheet will hold over 3 billion ENA. This round of funding will be used to purchase locked ENA from Ethena's foundation subsidiary; meanwhile, the foundation subsidiary will entrust a third-party market maker to execute approximately $310 million in spot repurchases in the open market over the next 6-8 weeks, with a rhythm of: $5 million daily when ENA > $0.70; $10 million daily when ENA < $0.70 or when it drops more than 5% in a day. This is expected to account for 13% of the circulating supply, with the previous round of PIPE having acquired about 7.3%. Additionally, the Ethena Foundation retains veto power over the sale of StablecoinX. This locks the demand side of equity financing and on-chain governance assets together, forming an institutional channel of "compliant capital → governance token demand." Token Side (ENA): The scale of USDe has surged to $12 billion, ranking as the third largest stablecoin, with historical protocol revenue exceeding $500 million. Aave's risk exposure to USDe-related assets once reached approximately $4.7 billion; discussions regarding the sENA fee switch are accelerating: the Ethena Risk Committee has set clear activation indicators (USDe circulation, cumulative protocol revenue, CEX coverage). With USDe landing on Binance, the last key condition has also been met, and the protocol is now equipped to initiate the mechanism to allocate part of the revenue to sENA. This means that the valve for capturing cash flow through tokens is entering a substantial opening phase, and the value support for ENA will shift from purely relying on growth expectations to directly anchoring protocol cash flows. External Signals (DAT Reserves): Mega Matrix (NYSE: MPU) has announced that ENA will be the primary strategic reserve for DAT, effectively using the balance sheet of a publicly listed company to "provide long-term buying support" for the protocol. At the same time, Mega Matrix has submitted a $2 billion shelf registration to the SEC, reserving space for flexible financing in batches over the coming years. This means it not only locks ENA on the asset allocation side but also leaves an upper limit for "continuous accumulation" or related capital operations on the financing tool level, providing external institutional support for the long-term demand side of ENA. Unlike the "direct shell + PIPE + ATM" arbitrage model, these three design points form a closed loop:

Equity Financing → ENA Demand/Repurchase → USDe Expansion → Protocol Cash Flow Growth (supporting valuation and refinancing) → DAT/Institutional Allocation → External Structural Buying → Flowing back to both token and equity levels, ultimately benefiting both token holders and shareholders.

This is the first time a DeFi protocol has entered the US stock market through structured financial instruments, and Ethena is transforming "protocol growth" into "institutional demand," making ENA's value capture more resilient across cycles, which is one of the core reasons we continue to heavily invest.

USDe: The New Benchmark Interest Rate for DeFi

USDe is driven by a crypto-native delta-neutral mechanism, gradually being viewed by the market as the new benchmark interest rate for DeFi funds and an anchor for "quasi-risk-free assets":

• Supply Volume: Surpassing $12.5 billion by the end of August, ranking as the third largest stablecoin;

• Top Lending Exposure: Aave's risk exposure to Ethena-related assets reaches $4.7 billion, demonstrating its primary liquidity position in the mainstream DeFi credit market.

• Cross-Chain Scale: Cumulative trading volume exceeds $5.7 billion;

• Yield Range: Through delta-neutral strategies, it offers approximately 9-11% annualized returns, regarded as the "risk-free rate" of DeFi.

• Protocol Revenue: Cumulative revenue exceeds $500 million, with the highest weekly revenue reaching $13.4 million in the week of August 25.

As USDe is more widely used as collateral and settlement assets, the triad of scale—liquidity—yield will further strengthen ENA's governance and distribution value (including potential value recapture from mechanisms like fee-switch).

The "Backhand" After Stablecoins: Expanding from Yield Dollars to Settlement and Capital Layers

Stablecoins are not the endpoint but the foundation for cash flow and distribution. Ethena's "backhand" is reflected in the synergistic expansion of distribution and settlement:

Distribution Layer: Bringing "Yield Dollars" to Institutions and Billion-User Scale

• iUSDe (Institutional Version): By using transfer-restricted contract forms, it brings the yield nature of sUSDe into the TradFi distribution network in a compliant manner, reducing operational and compliance friction for institutions.

• tsUSDe (Telegram/TON): Deep collaboration with TON embeds sUSDe natively into the Telegram wallet ecosystem, targeting a billion-level user base, making dollar yields an instantly distributable internet-native asset.

  Why It Matters: The "light compliance + platform-level entry" on the distribution side can thicken the positive feedback loop of "USDe scale → lending exposure → protocol revenue"; Aave's $4.7 billion related risk position is already validating this backbone.

Settlement Layer: Converge Turns USDe into Native Gas/Settlement Assets

Converge Chain: Co-built with Securitize, a modular combination of Arbitrum + Celestia, supporting USDe / USDtb as gas and settlement assets, and enhancing security with ENA staking, compatible with both permissioned and permissionless applications.

Why It Matters: When "yield dollars" become the foundational settlement fuel, the network effect of USDe rises from financial primitives to transaction routing/accounting units; this gives Ethena the opportunity to undertake high-value businesses after stablecoins, such as RWA issuance, institutional settlement, and market-making collateral. Our Judgment: This combination of "institutional compliance entry + super distribution front end + dedicated settlement chain" significantly enhances the accessibility and usability of USDe, bringing continuous cash flow spillover across scenarios and customer groups for ENA.

Risks and Moat: Transparent Mechanisms + Structural Diversification

Our increased investment in Ethena is also based on our examination of its risk governance and mechanism transparency:

• Transactional Risk: USDe essentially relies on a basis/funding framework of "multiple spot/short perpetual," where extreme market conditions may compress yields or briefly invert them. Ethena mitigates such risks through multiple exchanges, diversified counterparties, and dynamic hedging parameters.

• Systemic Spillover: As USDe becomes a leading collateral asset, the risk governance of major lending protocols (increasing risk weights, governance parameters) is also keeping pace.

ArkStream's Investment Logic

From short-term to long-term, Ethena's investment logic is very clear:

• Short-Term (Tactical Level): USDe has grown into the largest yield-based capital reservoir in DeFi. Its $12.5 billion circulation scale and $4.7 billion risk exposure on Aave give it the status of a "primary collateral asset" in the DeFi lending market. Meanwhile, USDe's 9-11% annualized yield has been viewed by the market as a quasi-"risk-free rate," becoming the core anchor for liquidity aggregation. The logic at this stage is: the continuous strengthening of scale and yield makes USDe the funding hub for the entire ecosystem, providing stable accumulation for protocol cash flows.

• Mid-Term (Structural Level): Ethena has completed the coupling with traditional markets in its capital structure. Through SPAC → PIPE → De-SPAC, USDe/ENA is bound into the compliant framework of the US stock market; StablecoinX, with a cumulative $895 million PIPE and 3 billion ENA on its balance sheet, establishes an institutional channel for governance token demand; at the same time, Mega Matrix's DAT reserves and $2 billion shelf registration further institutionalize external capital buying. The logic at this stage is: by using structured financial instruments, locking equity financing and token demand together, ENA's valuation becomes linked to traditional capital markets.

• Long-Term (Paradigmatic Level): The most critical turning point comes from the official landing of the sENA fee switch. The three activation indicators set by the Risk Committee (USDe circulation, cumulative revenue, CEX coverage) have now all been met, especially after USDe's listing on Binance, completing the last coverage condition. This means Ethena is now equipped to allocate part of the protocol revenue directly to sENA. From now on, ENA will shift from being "growth narrative-driven" to "cash flow-driven," becoming the first stablecoin governance token capable of directly capturing the protocol's real cash flows. Combined with the external long-term buying support brought by DAT reserves, ENA's value support will present a dual-driven model of "endogenous cash flow distribution + external structured allocation." We believe that within this framework, ENA is expected to evolve into a "quasi-gold reserve" asset for stablecoin governance, achieving a positive cross-cycle loop between protocol cash flows and capital markets.

Conclusion

In ArkStream's view, Ethena is not just a stablecoin protocol but a bridge between crypto-native yields and traditional capital markets. When the product sets the correct "base interest rate," and the capital structure provides a "institutional gateway" to the US stock market, ENA's value capture possesses cross-cycle extensibility. Our decision to increase investment at this time supports Ethena's decisive step from PMF to CMF.