Ondo Finance (ONDO) and Ethena (ENA) have become two of the fastest-growing blockchains in the industry. Their tokens have attained a market cap of over $1.6 billion and $1.3 billion, respectively. So, which is a better buy between ONDO and ENA?
What is Ondo Finance?
Ondo Finance is a leading player in the tokenization industry. Backed by Founders Fund, Coinbase, and Pantera, the network runs two tokenized funds that let people earn returns - USDY and OUSG. The US Dollar Yield (USDY) has accumulated over $250 million in assets, giving users a 5.20% APY.
On the other hand, the US Treasuries (OUSG) token has accumulated over $215 million in assets and has an APY of 4.96%. Ondo generates yields by investing in funds managed by Blackrock and PIMCO. It also uses regulated service providers like StoneX and Ankura to ensure that users receive daily accounting.
While USDY and OUSD are not classified as stablecoins, holders believe that they are better than Tether USDT and USD Coin. That’s because, while USDT and USDC owners invest in government and commercial paper, holders don’t receive a share of the profit. If you hold $10,000 in USDT in ten years, you will receive back the same amount.
What is Ethena?
Ethena is a blockchain project that has been compared to Terra, which collapsed in 2022. That’s because Ethena provides USDe, a new stablecoin that has over $2.8 billion in assets and almost 200k users. It is backed by DragonFly, Arthur Ayes, and Binance.
USDe stablecoin holders are making a fortune. While Ondo’s USDY has an APY of 5.20%, USDe has a yield of over 35.9%. This is a bigger return than what most companies return to their investors.
USDe uses a fairly complex approach to generate returns. It initially makes money by staking Ethereum which generates a yield of less than 3%. It then opens short derivatives when users mint the USDe stablecoin. When this happens, it leads to a mismatch between the positive funding rate and basis spread earned by participants short the delta exposure.
Altogether, Ethena uses complex derivatives and leverage that most analysts believe are a bit risky, especially when something goes wrong. For example, Ethena came into the spotlight after speculations that Bybit, a leading player in its ecosystem was insolvent.
Better buy between Ondo and Ethena?
Ondo Finance vs Ethena
Ondo and Ethena are fairly new crypto tokens that started to trade earlier this year. In the future, their performance will depend on the general performance of the crypto industry and demand for their underlying assets: OUSG, USDY, and USDe.
However, because of the risks associated with USDe, I believe that ONDO is a safer bet. Also, as mentioned before, the USDe stablecoin could be banned in the United States if the Lummis-Gillibrand regulation bill passes the House and the Senate. This bill would ban all algorithmic stablecoins to prevent a similar event to the Terra Luna collapse.
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