DeFi
Pendle TVL drops 45% as major markets mature
Several liquid re-staking markets, including Ether.Fi’s eETH and Renzo’s ezETH, expired on June 27, forcing depositors to withdraw their funds.
Pendle’s Total Value Locked (TVL) yield trading protocol has fallen 45% in just one week, from $6.2 billion to $3.5 billion, according to data from DeFiLlama.
The sharp drop came as several liquid re-staking markets, including Ether.Fi’s eETH, Renzo’s ezETH, Puffer’s pufETH, Kelp’s rsETH, and Swell’s rswETH, matured on June 27. As these markets matured, they allowed users to redeem their principal investments, leading to substantial capital withdrawals.
Pendle CEO TN Lee told The Defiant that the large pools of Liquid Restaking Tokens (LRT) that started this year matured on June 27, totaling nearly $4 billion.
On PendulumLRT is divided into principal tokens (PT) and yield tokens (YT). When users stake assets like ETH, they receive PT-ETH, which can be converted back to ETH at the end of the staking period. YT represents the interest earned on the staked asset, which can be traded separately from the principal amount.
“Pendle’s mechanics worked exactly as intended,” Lee said. “Users claimed their PT and liquidity provider tokens while YT dropped to zero in exchange for leverage points.”
Another crucial factor in the decline in TVL was the decline in demand for YT. As several users left Pendle after the LRTs expired, demand for YT plummeted, causing PT yields to fall below 10%.
This drop led users to move their ETH to other platforms, which then caused the price of the PENDLE token to drop 40% from $7 to $4.2 in a week, according to CoinGecko.
Lee acknowledges that several users left Pendle after LRTs expired, leading to low demand for YTs. These tokens allow users to earn yield on their assets, but lose all value upon maturity.
Increase in TVL
In April, Pendle TVL jumped up by 40%, reaching nearly $3.9 billion. This increase is mainly due to increased demand for exposure to DeFi protocols.
Pendle capitalized on this demand by offering traders a way to gain leveraged exposure to EigenLayer and LRT protocols like EtherFi, Swell Network, and Puffer Finance.
EigenLayer points can be earned by re-staking ETH or LST such as Lido’s stETH through the protocol.
When traders purchase YT, they have the opportunity to collect additional airdrop points. The idea behind this is that the airdrops received will be worth more than the cost of purchasing the YT.
According to Token Terminal dataPendle’s daily active user count has dropped from a peak of 23,000 in April to less than 1,000 today. In May and June, the number of daily active users ranged from 3,000 to 5,000.
Pendle introduced a rollover feature to help users transfer their liquidity to new pools.
“Despite the drop in TVL, this is an integral part of our platform lifecycle. The renewal process ensures that users can move their assets seamlessly,” he said.
According to Lee, the APY is not as high as Before (over 40%), and new pools could suffer from price impact due to lower liquidity. “Still, Pendle remains a place for good ETH yields.”
Recovery plans
Lee noted that Pendle is working with other protocols to recover TVL.
“We’ve had discussions with protocols and some have provided higher multipliers,” he mentioned. “For example, EtherFi gave us a 4x multiplier and some of our pools on the Arbitrum network are incentivized with $ARB tokens for LPs, so there’s good opportunity in the Pendle pool on Arbitrum right now.”
Pendle also rolled out features like zero price impact mode and limit orders. “We added a PT and LP rollover feature and highlighted pools that are currently offering good APY.”
Lee concluded that the Pendle team is developing PendleV3 to introduce new yield strategies and meet the needs of emerging markets.
“Pendle supports any yield-generating asset. Pendle has seen growth in the first half of the year from the points meta, which allows for leveraged point farming or very nice fixed yields,” he added. “While this remains our primary growth driver, we are always open to exploring and experimenting with other asset types, both inside and outside of resttaking. We are particularly supportive of supporting yield-generating assets outside of ETH, such as BTC.”