Ethena founder Guy Young said crypto and equity markets price leverage differently due to their distinct risk profiles.
Crypto experiences 80 percent drawdowns every three to four years, Young noted. This cyclical behavior makes paying positive interest rates to hold long positions illogical near cycle peaks. Equities, by contrast, have trended up over two decades, creating a risk-reward calculation that justifies positive funding costs for leveraged long exposure.
Ethena's USDe addresses this by offering delta-neutral yield—staking ETH while shorting perpetual futures—rather than relying on directional leverage. The structure generates stable yields independent of crypto's volatility.
In DeFi, leverage costs are set by perpetual funding rates and collateralized loan rates from Aave, Compound, and other lending protocols. These rates often spike during downturns, reflecting higher perceived risk in crypto assets versus equities. Traditional finance allows investors to accept positive rates for equity leverage because the underlying asset class supports long-term appreciation. Crypto's cyclical crashes make the same bet far riskier—and far more expensive.
Young's framing highlights why protocol design matters. A yield product that ignores crypto's drawdown frequency will either misallocate capital or price risk incorrectly. Ethena's delta-neutral mechanics sidestep that problem by decoupling yield from directional exposure.
