Summary
This analysis is presented by LlamaRisk and Blockworks Advisory, members of the Risk Committee leading risk recommendations on the Reserve Fund. We periodically re-evaluate the fund’s size based on market conditions, changes in USDe’s backing, and projected capital needs, with the previous monthly update published in early February.
Through March, USDe TVL continued its decline from the ~$6.5B levels reported in our last update, with perpetual futures exposure contracting accordingly. Ethena continued to manage hedging positions in an orderly fashion throughout the drawdown, and the stablecoin buffer remained healthy relative to outstanding supply.
LlamaRisk’s methodology currently suggests a need for $7M in the conservative scenario and $5M on the moderate side, while Blockworks Advisory recommends approximately $6.3M. The current fund size ($62M) is therefore approximately 9x larger than conservative tail-risk requirements. Continuous monitoring of the recommendations is available on LlamaRisk’s Ethena Risk Dashboard and Blockworks’ Risk tab on the Ethena Dashboard.
Source: LlamaRisk’s Ethena Risk Dashboard, April 2, 2026
Reserve Fund Composition
The Reserve Fund is currently composed of USDtb and a USDtb/USDC liquidity pool position, totaling approximately $62M:
- Quantity of USDtb: $41.98M
- Quantity of USDtb-USDC: $20.02M
Source: LlamaRisk’s Ethena Risk Dashboard, April 2, 2026
LlamaRisk Methodology & Estimations
Utilizing the Reserve Fund drawdown methodology developed by LlamaRisk, which considers current and historical market conditions, USDe collateral distribution, stablecoin buffer, and sUSDe supply, we present up-to-date drawdown simulations to estimate current Reserve Fund capitalization needs.
Conservative Scenario
In this scenario, according to the methodology, we assume all perpetual positions would need to be closed within a 24-hour time span, incurring 50 bps in negative funding rate losses and 50 bps in slippage losses. From this, we derive the following estimate for the required Reserve Fund size:
Source: Reserve Fund Drawdown Methodology, April 2, 2026
Simulating this short-term risk scenario results in a currently recommended Reserve Fund size estimation of ~$7 million — a substantial reduction from February’s ~$23M estimate, driven primarily by the continued contraction of USDe TVL and the corresponding decrease in perpetual futures exposure. With this Reserve Fund size, Ethena would remain solvent and be able to serve USDe redemptions, even under the worst tail-risk scenario that would require closing all perpetual positions in a short time frame.
Moderate Scenario
The moderate scenario assumes that a decline in funding rates would trigger a significant amount of sUSDe to enter the unstaking queue, leading to a potential wave of USDe redemptions. The maximum amount of USDe is based on the current circulating supply and the assumption that USDe in liquidity pools will not be redeemed. It is also assumed that Ethena will prioritize timely redemptions to prevent the USDe price from de-pegging, using its stablecoin buffer for instant redemptions and closing perpetual positions for the rest. Additionally, the scenario assumes that redemptions requiring the closure of perpetual positions will be managed with slippage capped at 75 basis points and funding rate losses limited to 5 basis points, while any remaining positions could face up to 50 basis points in funding losses before being gradually wound down with lower slippage.
Source: Reserve Fund Drawdown Methodology, April 2, 2026
This scenario results in a currently recommended Reserve Fund size of ~$5 million, down from ~$17M in February. With this Reserve Fund size, Ethena could manage a meaningful redemption event by utilizing its liquid buffer and unwinding positions in a more orderly manner, without incurring excessive slippage.
Blockworks Advisory Methodology & Estimations
Assuming a highly conservative scenario where Ethena chooses to unwind all perps positions within 24 hours during a severe market downturn, the Reserve Fund needs to cover two key costs: negative funding rates during that window and slippage from exiting positions. The likelihood of requiring 100% position closure in 24 hours is very low. This scenario captures a worst case possibility in terms of funding rates and execution.
To estimate funding costs, we use a dynamic model that factors in the specific assets and venues involved. The model identifies the worst 0.1% of historical daily funding observations for each asset and exchange pair, then applies those rates to Ethena’s current allocation. This composition sensitive approach becomes especially important as the mix of assets and venues shifts over time. The same total perps notional can carry meaningfully different tail funding risk depending on where it is deployed.
Slippage is the second major cost, incurred on both the spot and perpetual legs. We estimate this at 50 bps on total notional, consistent with the maximum slippage observed during the Bybit hack event.
Current Estimation
Based on this methodology, the Reserve Fund would today need to hold approximately $6.3M to be sufficiently capitalized (down from $18.2M in February).
Source: Reserve Fund Sizing Recommendation, April 7, 2026
The decline is driven by the continued contraction of Ethena’s perpetual futures exposure as USDe TVL declined through March and backing rotated further into USDtb and lending allocations. Both cost components (slippage and funding) are directly proportional to the size of open perp positions, so as that exposure shrinks, so does the required Reserve Fund.
At $6.3M, both legs of the Reserve Fund sizing are minimal: the funding cost estimate reflects near zero perp exposure across the asset venue matrix, and slippage costs are correspondingly small.
To put this in historical context, over the six months prior to the current backing regime shift, the Blockworks conservative estimate ranged from roughly $15M to $50M depending on market conditions and perp allocation. This range reflects how quickly requirements can move as Ethena rotates between backing strategies. If funding rate conditions improve and Ethena reverts to heavier perp exposure, Reserve Fund requirements would rise materially. The current low estimate should not be anchored to as a permanent baseline.
The Reserve Fund balance has remained essentially flat at $62M since mid 2025 (red line). However, the reserve ratio (blue line) whichis the reserve fund share of USDe supply collapsed from 1.16% in July 2025 to a trough of 0.35% in late September / early October 2025 as USDe supply expanded sharply while the fund remained still. From October onward, the ratio recovered steadly back towards 1.16% as USDe TVL contracted. As of end March 2026, the ratio is 1.061% and roughly back where it started.
Source: USDe Reserve Fund, April 7, 2026
Recommendation: Redirect USDtb Interest Earnings to sUSDe Holders
With coverage requirements dropping from ~$23M to $7M (conservative) while the Reserve Fund remains at $62M, the fund is now ~9x overcapitalized. Meanwhile, interest on the Reserve Fund’s $41.98M in USDtb (which is transferred manually to the multisig, not auto-accrued) has not been distributed in over 4 months. The last transfer was ~169k USDtb approximately 4 months ago, with prior transfers of ~103k and 500 USDtb roughly 6 months ago.
At this level of overcapitalization, routing additional yield into the Reserve Fund provides diminishing benefits. This interest is better directed to sUSDe holders, who bear the economic exposure of USDe’s backing strategy.
Proposed Action
We therefore recommend the following:
- Direct the outstanding accrued USDtb interest from the past 4 months to sUSDe holders rather than to the Reserve Fund.
- Going forward, redirect future USDtb interest transfers to sUSDe holders for as long as the Reserve Fund balance exceeds 2x the higher of the conservative or Blockworks estimates (currently implying a floor of ~$14M). Interest should resume flowing to the Reserve Fund only if its balance falls below this threshold.