[How Ethena and Ondo Finance are changing the crypto income industry]
As central bank interest rates remain high, demand for yield is growing. In the United States, the Federal Reserve kept interest rates at a 23-year high between 5.25% and 5.50%. Investors can allocate funds to risk-free assets such as government bonds to obtain returns. Financial services firms have also created active funds focused on income, such as the J.P. Morgan Senior Equity Income ETF (JEPI).
Cryptocurrencies are also generating some of the biggest gains within the industry. Solana’s staking yield is 7%, while Celestia, Cosmos Hub, and Injective earn over 10%. Ondo Finance is one of the top companies changing the cryptocurrency yield industry, launching USDY and OUSG funds with over $500 million in total assets. USDY invests in bank deposits and short-term U.S. Treasuries, yielding 5.7%. OUSG is a tokenized asset primarily invested in the Blackrock USD Institutional Digital Liquidity Fund (BUIDL), which grew to $500 million.
USDY is a better yielding asset and suitable as an alternative to Tether and USD Coin. However, it's unclear whether this performance will continue when the Fed starts cutting interest rates. Ondo Finance’s assets are less risky, while Ethena’s USDe stablecoin has a higher yield of 7.4%, but is riskier due to its similarities to the Terra USD stablecoin that crashed in 2022.
The risk that regulators could ban stablecoins like USDe explains the divergence of ONDO and Ethena (ENA) tokens over the past few months. The Ondo Finance token is up more than 40%, while Ethena’s ENA token is down more than 70%.
If you just want to generate income, investing in government bonds or related ETFs is a better option. If your goal is to replace stablecoins like Tether and USD Coin, USDY is a better investment asset due to its stability. Conversely, USDe is relatively riskier and may lose its peg during periods of high volatility.
