Unveiling Pendle Finance’s Rapid Rise to a $4.4 Billion TVL
This remarkable surge in TVL owes much to Pendle’s strategic integrations with Eigenlayer and Ethena, both of which have garnered immense popularity in the last quarter.
Since our last update on Pendle Finance, the project has experienced substantial growth. From 2023, its Total Value Locked (TVL) has consistently risen and then saw a dramatic surge at the start of 2024, increasing more than 19-fold to surpass $4.4 billion. Pendle now ranks as the eighth-largest decentralized application (dApp) by TVL in the entire DeFi sector and shows no signs of decelerating its growth trajectory.
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Pendle Finance is a DeFi protocol that enables users to trade tokenized future yields. Essentially, it allows investors to lock in future interest rates by separating the ownership of an underlying yield-bearing asset from its future yield through the issuance of an Ownership Token and a Yield Token. Holders of the Yield Token are entitled to the future yields of the underlying asset for a specified period, facilitating speculation on yield rate fluctuations or hedging against them.
This significant increase in Pendle’s TVL can be attributed to two main factors: the rising popularity of Eigenlayer and liquidity restaking projects and the launch of a new stablecoin called Ethena.
Eigenlayer has been one of the most discussed DeFi protocols this year, amassing a TVL of $15 billion. To attract deposits, the project has introduced a point program that awards points to users who stake ETH or Lido’s stETH with the protocol.
Pendle offers its users the chance to trade and acquire these points with leverage, presenting significant opportunities for those seeking to amplify their exposure to Eigenlayer points. This feature appeals both to users who prefer taking higher risks with leverage farming and those who opt for a high fixed yield without engaging in leveraged transactions.
Leverage farming points generates attractive APYs. These appealing yields have attracted considerable deposits, contributing to the protocol’s increasing TVL.
A similar trend is happening with Ethena, especially with regard to its airdrop points. The project has already distributed a portion of its tokens to its users and has announced a “Season 2” airdrop, preparing to distribute a second batch of its tokens. This makes Ethena’s USDe yield particularly appealing.
It is important to note that by depositing their tokens into Pendle vaults, users can secure a fixed annual percentage yield. However, they forgo potentially higher returns. As a result, trading these yields has become increasingly attractive to speculators.
Notably, Pendle has been endorsed by multiple crypto influencers, including Arthur Hayes, the co-founder of BitMex, who is also an investor and advisor for the project.
Despite this heightened activity, Pendle’s market valuation has yet to peak, with a market cap of approximately $565 million—a figure relatively modest in comparison to its TVL.
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