Research Summary
The report discusses the growing role of Pendle in the Liquid Restaking Tokens (LRT) sector. It highlights how Pendle’s use cases have expanded with the introduction of new primitives like Yield Bearing Dollars and LRTs. The report also explains how Pendle’s PT/YT markets for LRTs have driven the $PENDLE price.
Key Takeaways
Pendle’s Role in the LRT Sector
- Expansion of Use Cases: Pendle’s use cases have expanded with the introduction of new primitives like Yield Bearing Dollars and Liquid Restaking Tokens (LRTs). This has allowed Pendle to introduce a market for trading future EigenLayer and Restaking Protocol airdrops.
- Driving $PENDLE Price: The LRT narrative and its close relation to EigenLayer have been strong drivers of $PENDLE price in recent months. This is due to the introduction of PT/YT markets for LRTs by Pendle.
Trading of Future Airdrops
- Pre-Market Trading: Pendle allows for the pre-market trading of airdrops. This is a unique use case that demonstrates how easily the concept of yield trading can extend to alternative primitives.
- Principal Token (PT): The PT allows the holder to pre-sell and lock in the underlying staked ETH yield, the EigenLayer airdrop, and a potential airdrop from the Restaking Protocol.
Yield Token (YT)
- Leveraged Point Farming: The YT has been designed by Pendle to allow “leveraged point farming”. This means that you can swap 1 eETH for 9.53 YT eETH which accrues points as though you were holding 9.53 eETH.
- Value Convergence: The value of the YT will eventually converge to 0 as the time to expiry decreases. This means that unless a YT trader thinks the PT yield is mispriced and they are playing a rerating higher, they are ultimately making a leveraged bet on the value of the EigenLayer and Liquid Restaking Protocol airdrop.
Actionable Insights
- Monitor Pendle’s Role in the LRT Sector: Given the expanding use cases and the impact on $PENDLE price, it would be beneficial to keep a close eye on Pendle’s role in the LRT sector.
- Understand the Concept of Pre-Market Trading: Pendle’s unique use case of allowing for the pre-market trading of airdrops could have significant implications for yield trading. Understanding this concept could provide valuable insights into future trends.
- Consider the Implications of YT Value Convergence: The fact that the value of the YT will eventually converge to 0 as the time to expiry decreases could have significant implications for YT traders. Understanding these implications could help in making informed trading decisions.
