Ether Races 6% Against Bitcoin as GENIUS Act Puts Spotlight on Yield-Bearing Stablecoins: Analyst

Ethereum's native token ether ETH$3,153.99, is gaining ground against bitcoin BTC$89,914.51, as the impending GENIUS Act is likely to ban yield-bearing stablecoins that promise interest-like returns, according to Markus Thielen, founder of 10x Research.

The Binance-listed ether-bitcoin ratio, representing ether's BTC-denominated price, rose over 5.96% to 0.02670 on Tuesday, registering its best performance since May 13, according to data source TradingView.

The upswing marked a bullish resolution to the multi-week range play and suggests continued ether outperformance ahead. Ether's dollar-denominated price rose over 4%, topping $3,100 for the first time since February.

According to Markus Thielen, founder of 10x Research, the key driver for ether's price surge is seemingly the growing anticipation that the GENIUS Act, or the U.S. stablecoin bill, will pass, restricting U.S. stablecoin issuers from paying interest.

"That would potentially reinforce Ethereum's importance within the digital asset ecosystem," Thielen said in a client note shared with CoinDesk.

Thielen added that the GENIUS Act has put the spotlight on Ethena's $5 billion synthetic dollar USDe, which achieves delta-hedging or cash and carry arbitrage by shorting perpetual futures equivalent to the amount of ETH received from users as collateral. That's how it generates yield on USDe.

The long-prevailing theory is that the shorting operation adds to bearish pressures in the futures market and caps basis, the gap between futures and spot prices.

"Ethena currently represents about 4% of Ethereum’s $26 billion open interest, and by consistently selling futures, it has exerted downward pressure on ETH prices," Thielen said.

Ethena has already reached out to the U.S. Securities and Exchange Commission (SEC) to seek clarity on synthetic dollars, such as the USDe. The team reportedly argued that the synthetic dollar functions as a payment instrument rather than a security and falls outside the scope of the GENIUS Act and the STABLE Act, which regulate payment stablecoin issuers.

Ethena is headquartered in Lisbon, Portugal, with new dollar inflows primarily coming from outside the U.S. So, it remains to be seen how it fits the evolving regulatory picture in the U.S.

"If Ethena were to comply with the U.S. stablecoin bill, it could be forced to stop buying Ethereum altogether. However, the market may be interpreting this dynamic differently—ENA-USDT continues to rally, supported by rising Ethereum funding rates," Thielen said, adding that the USDe is not offered in the U.S. and so Ethena is not at risk.

Ethena is performing well

Ethena has earned a total revenue of nearly $300 million over the past 12 months, trailing behind Tether, Ethereum, Circle and Solana, according to data source TokenTerminal. The protcol has also earned a fee revenue of $15 million in one month.

"Ethena is performing exceptionally well with the rise in funding rates, which is encouraging numerous hedge funds to set up funding arbitrage strategies. We anticipate this will translate into increased inflows for Ethereum ETFs," Thielen told CoinDesk.

The GENIUS Act, which got the Senate approval in June with bipartisan support, is expected to head for a floor vote in the House by Thursday.

Read more: U.S. Senate Passes GENIUS Act to Regulate Stablecoins, Marking Crypto Industry Win

08:23 UTC: Adds additional comments from 10x Research's Thielen.