Ethereum Foundation Deploys $120M to DeFi

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Good Morning.

The market is fairly slow with recent TGE launches not performing as well as a few months back — some of them are even trading lower than their last private round valuations. Stay vigilant.

In Today's Email:

• What Matters: EF Deploys $120M to DeFi 💉 

• Founders Highlight: Seung & Jason of Story 👨 

• Deal Flow: Legend Raises $15M 💰️ 

You read and share. We listen and improve. Send us feedback at [email protected].

TOGETHER WITH

Ethena Labs

Introducing iUSDe by Ethena: The Institutional Bridge Between TradFi & DeFi – Launching February 2025

Introducing iUSDe, Ethena’s next-generation synthetic dollar designed specifically for traditional finance (TradFi). 

Building on the proven success of sUSDe, iUSDe wraps institutional compliance around a high-yield, structurally uncorrelated asset—empowering asset managers, private credit funds, and prime brokers to tap into DeFi returns without direct crypto exposure.

Why iUSDe Stands Out for TradFi:

• Institutional Compliance: A smart wrapper contract introduces transfer restrictions that align with strict regulatory standards, making iUSDe the ideal asset for traditional financial entities.

• Scalable Returns: Leverage crypto’s two most scalable yield drivers—staking and the futures basis trade—in a single dollar-denominated asset.

• Negative Correlation Advantage: Historically, as bond yields fall, crypto funding rates soar. With recent trends boosting sUSDe APY, a further easing in TradFi rates could spark $15B+ in iUSDe demand.

• Institutional Custody: Backing assets are securely held with institutional-grade custodians, ensuring compliance with legacy risk frameworks while remaining outside typical DeFi risks.

• Structural Yield Edge: With sUSDe delivering an impressive 18% APY in 2024, iUSDe is poised to outperform traditional fixed income benchmarks in a low-rate environment.

The Vision: Convergence

iUSDe is set to become crypto’s interest rate arbitrage engine—balancing capital flows across DeFi, CeFi, and TradFi. 

By unlocking the basis trade on centralized exchanges within an institutional-friendly framework, Ethena is bridging the gap between legacy finance and internet-native markets—a $15B+ opportunity awaits.

WHAT MATTERS

Ethereum Foundation Deploys $120M to DeFi

State of play: The Ethereum Foundation (EF) has injected ~$120M worth of ETH into DeFi lending protocols to earn yields without selling its assets.

• The foundation transferred 30,800 ETH into Aave, with 20,800 ETH directed to its core market and 10,000 ETH to Aave Prime.

• EF also allocated 10,000 ETH to MakerDAO’s Spark, and supplied 4,200 ETH to Compound.

• This strategy is expected to yield about $1.5M annually at a 1.5% supply rate.

• The move comes as the foundation shifts its approach following previous criticism over treasury management practices, which involved selling ETH for operational needs.

• The recent deployment follows an earlier consolidation of 50,000 ETH into a multi-sig wallet to further support DeFi protocols.

What’s next: EF’s strategy may prompt further adjustments in its governance and asset management approach. Community members have also suggested leadership changes, including replacing the executive director, Aya Miyaguchi.

For builders and investors: The number one thing you can do to find PMF and understand your users behavior is by trying as many products as possible. Don’t be a crypto professional that only build but never intensely interact onchain.

BUILDER-INVESTOR HIGHLIGHT

Seung Yoon Lee & Jason Zhao of Story Protocol

Intro: Seung Yoon Lee & Jason Zhao are the co-founders of Story Protocol, a purpose-built L 1 blockchain that tokenizes intellectual property into a programmable store of value in an AI-driven world.

Previous background: Lee was previously the Global Strategy Officer at Kakao Entertainment, he sold his serialized fiction app Radish to Kakao for $440M in 2021.

• He is also a venture partner at Hashed, an Asia Society Asia 21 Young Leader, and the first Asian President of the Oxford Union.

Zhao was a Product Manager at DeepMind, working on Google's AI models. An active angel investor and founding editor-in-chief of Stanford Rewired, he also taught at Stanford’s d.school as an IDEO Design Fellow.

• He holds degrees in Philosophy and Computer Science from Stanford University.

The big idea: Lee and Zhao through Story aim to cut legal friction for creatives and academics by offering a platform to register and commercially leverage IP.

• IP owners can set programmable usage terms, enabling direct trading, extending, and monetization of ideas without relying on intermediaries.

Take a peek at our referral reward at the bottom of this issue. Share this newsletter and receive our list of 500 crypto VC individuals 👇

INSIGHTS

JPMorgan Warns Tether May Need to Sell Bitcoin

State of play: JPMorgan analysts warn that if proposed US stablecoin regulations are enacted, Tether may have to restructure its asset reserves by selling off non-compliant holdings such as BTC, precious metals, corporate paper, and secured loans.

• Under the House’s STABLE Act, only 66% of Tether’s reserves would meet the new standards

• While the Senate’s GENIUS Act would allow for 83% compliance.

• This tightening comes as Tether’s stablecoin supply has surged, causing a decline in its compliance ratio.

• Currently, Tether holds about 83,758 BTC (~$8B) as part of its diverse reserve portfolio.

• The regulators’ push for more liquid and high-quality assets reflects a broader effort to enhance transparency and risk management in the stablecoin market.

• Tether controls nearly 60% of this market and any forced asset restructuring could have significant implications for its operations and market positioning.

• Similar regulatory challenges have already impacted its European activities under the MiCA rules.

DEAL FLOWS

Legend Raises $15M from a16z & Coinbase

Deal flows slowed down this week - we saw $68M in deals 💼 

Legend, a new DeFi platform founded by former Compound executives including ex-CEO Jayson Hobby, has raised $15M from Andreessen Horowitz and Coinbase Ventures.

• The platform aims to integrate various DeFi services into a single mobile app, offering users a self-custody wallet with embedded access to DEXs as well as lending and borrowing services from Compound and Morpho.

• Designed as a "walled garden," Legend seeks to simplify DeFi by pre-integrating and vetting services, reducing the risk for users.

• The funds will be used to accelerate app development, expand the team, and boost marketing efforts.

Deal flows in the past week:

• Whitestone Research, $1.3M Pre-Seed Round

• InfiniFi, $3M Pre-Seed Round

• Blum, $5M Pre-Seed & Seed Round

• Drosera, $3.25M Seed Round

• Coala Pay, $3.5M Seed Round

• Mirai Labs, $4M Seed Round

• ProdigyFi, $5M Seed Round

• Fragmetric, $7M Seed Round

• Cabal, $3M Unknown Round

• NodeGo, $8M Unknown Round

• The Game Company, $10M Unknown Round

• Legend, $15M Unknown Round

QUICK BITES

• GameStop considers investing in Bitcoin & other crypto.

• World Liberty Financial buys more WBTC and MOVE tokens.

• Franklin Templeton expands its money market fund to Solana.

• Coinbase's revenue reaches $6.1B, more than double from 2023.

• JPMorgan says Tether may sell BTC under new US stablecoin rules.

• Ethereum Foundation injects nearly $120M worth of ETH into DeFi.

• US Customs & Border Patrol expands BTC mining machine seizures.

• Ethereum devs release client software for Pectra upgrade on testnets.

• OpenSea releases OS2 NFT platform in beta, teases SEA token airdrop.

• Judge agrees to pause legal dispute between Binance & SEC until April.

NOTEWORTHY READS

• Decentralised’s read on when DeFi met AI.

• Bridget Harris’ read on cefi packaging defi.

• Arthur Hayes’ read on zero knowledge proof.

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Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.