A Case Study in Crypto Market Volatility

Pendle, a DeFi protocol at the forefront of tokenization, has seen its Total Value Locked (TVL) nearly halved since mid-June, as the broader crypto market faces a sustained period of volatility and investor caution.

The downward spiral began June 27th, and since then, the values have been on a steady decline.

According to DefiLama, Pandle’s TVL is currently $3.49 billion, down almost 50% from the all-time high of $6.721 billion on June 10. The highest TVL is on the Ethereum chain ($3.1 billion), followed by Arbitrum ($273.4 million) and Mantle ($114.63 million).

As per @ai_9684xtpa, a crypto and DeFi enthusiast on social media platform X (formerly known as Twitter), the broader crypto market meltdown could lead to a further decline in Pendle’s TVL.

“The downward trend may not change in the short term due to the impact of the market.”

Data from Sentio shows that today’s trading volume stands at $21.7 million, while yesterday’s was $48.4 million. Pendle’s TVL declined primarily because a large number of Liquid Restaking Tokens (LRTs) expired, triggering capital withdrawals.

As per Pendle documentation, the Principal Token (PT), is given to those who stake in the DeFi protocol for yield. PTs can be redeemed upon maturity at 1:1 for the accounting asset. As the expiration date approached, Sun Ge, who had a total investment of 48,000 ETH in Pendle, withdrew 293 million USD worth of tokens, resulting in the TVL drop.

Yet another reason, as explained by @yieldinator on X, is the exit of users from Pendle after maturity. Users were bearish on the upcoming LRT airdrops and exited, leading to low demand for Yield Tokens (YTs). These tokens allow users to stream the underlying asset’s yields.

[Is $PENDLE Over? Should We Buy the Dip?]

TVL crashed? What happened?@pendle_fi saw a 42% decrease in its TVL, dropping from $6.18 billion on June 27 to $3.6 billion currently.

The decrease in TVL is mainly attributed to certain liquid restaking market pools maturing on June… pic.twitter.com/aFda3whlac

— Yieldinator🚀 (@yieldinator) July 3, 2024

With the YT demand drop, the PT yields tanked below 10% (~6%), making them less attractive. As a result, users shifted their ETH to other platforms. Further, the price of the PENDLE token also crashed almost 45% from its all-time high of $7.5 to $4.2, mirroring the TVL drop.

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