Ethena Withdraws from $5.5 Billion Hyperliquid Stablecoin Race

On September 11, 2025, Ethena Labs announced its withdrawal from Hyperliquid’s USDH stablecoin bidding race. The decision came after community feedback questioning whether Ethena was the right fit for the ecosystem. Guy Young, Ethena’s founder, said the company chose to step aside rather than fight the community’s concerns.

This withdrawal clears the path for Native Markets, which already held a strong lead with support from major validators. The contest involves control over $5.5 billion in stablecoin deposits and could generate hundreds of millions in annual revenue.

The Massive Stakes at Play

Hyperliquid currently holds $5.5 billion in USDC deposits, representing about 7.5% of all USDC in circulation. The platform has become a powerhouse in crypto trading, handling nearly 80% of all decentralized perpetual futures trading. In August alone, Hyperliquid generated $106 million in revenue with trading volumes approaching $400 billion.

The winner of the USDH contest could capture an estimated $220 million in annual Treasury yield that currently flows to external stablecoin issuers like Circle. This revenue would instead benefit the Hyperliquid ecosystem and HYPE token holders through buyback programs.

Hyperliquid announced the USDH initiative to reduce its heavy reliance on bridged assets like USDC. Currently, 95% of the platform’s $5.6 billion stablecoin supply comes from USDC, meaning most of the interest earned on these deposits goes to outside companies rather than the Hyperliquid community.

Native Markets Takes the Lead

With Ethena out of the race, Native Markets has emerged as the clear favorite. The team, led by Max Fiege, already secured 30.8% of validator support before Ethena’s withdrawal. Major validators including infinitefield.xyz and Alphaticks have publicly committed to supporting Native Markets.

Source: @gdog97

Native Markets was created specifically for this competition and focuses entirely on building within the Hyperliquid ecosystem. Their proposal centers on using Stripe’s Bridge infrastructure to issue USDH while splitting revenue between HYPE token buybacks and ecosystem growth.

The team has promised to contribute 50% of reserve yield to the Assistance Fund and dedicate the other 50% to USDH expansion through partnerships and new applications. This approach has resonated with validators who prioritize ecosystem alignment over external corporate interests.

Why Ethena Stepped Away

Ethena’s withdrawal came after validators raised three main concerns during community discussions. First, Ethena is not a native Hyperliquid team but operates across multiple blockchain ecosystems. Second, the company runs several products beyond stablecoins, which could create conflicting priorities. Third, Ethena’s broader business ambitions extend far beyond a single exchange partnership.

Before withdrawing, Ethena had submitted one of the most competitive proposals in the race. The company offered to back USDH entirely with USDtb, a token connected to BlackRock’s BUIDL fund. Ethena also pledged to return 95% of reserve revenue to the Hyperliquid community and inject up to $150 million in ecosystem incentives.

Despite these generous terms, the community’s preference for ecosystem-native solutions ultimately led to Ethena’s decision to withdraw. Guy Young acknowledged this reality and publicly congratulated Native Markets on their strong position.

The Competition Continues

The USDH race still includes several major players beyond Native Markets. Paxos Labs holds 7.6% of validator support and recently revised its proposal to include PayPal integration. The regulated stablecoin issuer promises to embed USDH into PayPal and Venmo products while contributing 95% of earnings to HYPE buybacks.

Other competitors include Frax Finance, Agora, and Sky (formerly MakerDAO). However, these teams have struggled to gain significant validator support compared to Native Markets’ early momentum. Betting markets currently give Native Markets around 65% odds of winning.

The final decision will be made through an on-chain validator vote scheduled for September 14, 2025, between 10:00 and 11:00 UTC. This transparent governance process allows HYPE token holders to align their stakes with validators who share their preferred choice.

Market Impact and Future Plans

The USDH announcement has already boosted HYPE token performance, with the price reaching new all-time highs above $52. The prospect of capturing hundreds of millions in annual revenue has attracted significant attention from both retail and institutional investors.

Even though Ethena withdrew from the USDH race, the company maintains its commitment to building on Hyperliquid. Young outlined plans for synthetic dollar products, USDe-powered savings tools, and exploration of new market opportunities within the ecosystem.

What This Means Going Forward

Ethena’s withdrawal demonstrates how community preferences can override even well-funded proposals in decentralized governance systems. The decision reflects Hyperliquid’s commitment to ecosystem-first solutions rather than external corporate partnerships.

The September 14 vote will finalize one of the most competitive and transparent stablecoin selection processes in crypto history. Regardless of the outcome, the bidding war has established new standards for community involvement in major protocol decisions.