Pendle Finance has been making the news today, 3 July, following its listing on Binance. But just what is Pendle ($PENDLE)? Let’s take a look.
Pendle Finance explained
Fred is a lender in the Aave marketplace. He has some spare ETH that he wants to put to work to earn some extra income. So he deposits ETH into Aave’s smart contract, becoming a liquidity provider. This is similar to Fred lending his money to someone who needs to borrow them. In return for lending his cryptocurrency, Fred earns interest on his deposits – also known as yield.
Now, let’s talk about the volatility of the yield interest.
The interest rate or yield that Fred earns on his lending is not fixed like in traditional banks. Instead, it’s determined by the supply and demand for each cryptocurrency within the Aave marketplace. When there is high demand for an asset, it means that borrowers are willing to pay more interest to borrow them and as a result, yield increases. Similarly, when there is low demand, borrowers will only pay little interest, meaning less yield for lenders. Yield is also determined by market conditions, investor sentiment etc.
Amidst this fluctuation, how can a lender like Fred maximise yield on his ETH?
That’s where Pendle comes in!
Pendle is a yield management platform that helps lenders and borrowers to maximise their yield. It is described as “a permissionless yield-trading protocol where users can execute various yield-management strategies”.
With Pendle, Fred is exposed to an array of services that can help him to make the most possible yield on his lent ETH.
But how is this achieved? Let’s find out.
How does Pendle work?
Pendle provides users with the tools to optimise their yield returns in both bull and bear markets by executing various yield-management strategies. In bull markets, when yields are high, users can maximise their returns, while in bear markets, when yields are lower, they can hedge against reductions and mitigate potential losses.
Pendle provides users with a range of advanced yield strategies designed to maximise returns on their assets. One such strategy is the fixed yield, where users can earn a predictable return on specific assets. Additionally, the long yield strategy allows users to speculate on the yield of a particular asset increasing by acquiring more yield tokens, presenting opportunities for higher returns during bullish market conditions. Pendle also empowers users to earn more yield without exposing themselves to additional risks, enhancing their potential for greater earnings in a permissionless and efficient manner.
There are three main aspects of Pendle’s operation.
Yield Tokenisation: Pendle wraps yield-bearing tokens into what they call SY (standardised yield tokens). For example, staked USDC on Compound has the ticker cUSDC. When wrapped on Pendle, it becomes SY-cUSDC.
The SY token is then split into two components: PT (principal token) and YT (yield token). This separation allows the yield to be tokenized separately from the original token, enabling greater flexibility in managing yields.
PT represents the initial value of the underlying yield-bearing token and can be redeemed after the specified maturity period. For example, if you own one PT-cUSDC with a one-year maturity, you can redeem one cUSDC after one year. PT tokens are tradable at any time, even before maturity. On the other hand, YT tokens represent the real-time yield generated by the underlying yield-bearing token, and you can manually claim the accrued yield from the Pendle Dashboard. For instance, if you have one YT-cUSDC with an average yield of 5% throughout the year, you will have accrued 0.05 cUSDC by the end of the year. Similar to PT, YT tokens are also tradeable anytime, even before maturity.
Pendle AMM (Automated Market Maker): PT and YT can be traded using Pendle’s AMM. The AMM is regarded as the core engine of the Pendle protocol and enables users to exchange these tokens without needing to understand the technicalities of the AMM itself. In summary, AMM facilitates liquidity and trading of yield tokens, allowing users to access the yield market more efficiently.
vePENDLE: In traditional finance, interest derivatives are employed to hedge interest rate risks. They are contracts that derive their value from changes in interest rates or the future interest rate movements on various financial assets. Pendle aims to introduce the concept of interest derivatives to deFi through vePENDLE, a yield derivative protocol.
Pendle crypto news
PENDLE, the utility token of Pendle Finance was listed on Binance Innovation zone today. It became available on the spot market with the following pairs – PENDLE/BTC, PENDLE/USDT, PENDLE/TUSD. In the next 48 hours from spot listing, Binance will add PENDLE as a new borrowable asset with the margin pair – PENDLE/USDT – on Isolated Margin.
The leading exchange also announced Pendle as the 35th project to be added to its launchpool. This addition will enable users to stake their BNB and TUSD to farm PENDLE over 25 days.
Following Binance’s announcements, PENDLE experienced a significant surge, soaring by 50%. This led to substantial gains for early investors, including a whale identified by analyst LookOnChain.
The utility token has also recorded a whopping 1,789% increase in trading volume in the last 24 hours, largely due to increased exposure on the leading exchange.
Remarkably, even before the Binance listing, the utility token had already seen impressive gains. As of 26 June, PENDLE achieved a staggering 1,552% increase from the beginning of the year. This surge resulted in an early investor netting a profit of $1.58million, representing a gain of approximately 162%.
PENDLE’s impressive run landed it the top spot on CoinGecko’s largest gainer in the second quarter of the year with a 125% gain.
How to buy PENDLE
To purchase PENDLE, follow these steps on Binance:
1. Create an Account: If you don’t have a Binance account, sign up and complete the necessary verification.
2. Deposit Funds: Deposit the desired funds (cryptocurrency or fiat) into your Binance wallet.
3. Search for PENDLE: Use the search function or navigate to find PENDLE on the Binance platform.
4. Select Trading Pair: Choose the trading pair you want to use to purchase PENDLE, such as PENDLE/USDT or PENDLE/BTC.
5. Place an Order: Decide whether to place a market order (buy at the current market price) or a limit order (set your preferred price).
6. Review Order: Double-check the details of your order, including the amount of PENDLE you want to buy.
7. Confirm Purchase: Click on the ‘Buy’ button to execute the order. If you placed a market order, the transaction will be completed instantly. If it’s a limit order, it will be executed when the market reaches your specified price.
8. Check Holdings: After the purchase, go to your Binance wallet to see the PENDLE tokens in your account.
FAQs
What does Pendle coin do?
PENDLE coin is the native governance token of the Pendle Finance ecosystem. It is used to transfer value across the ecosystem.
Is Pendle a good crypto?
PENDLE has strong fundamentals, an impressive market cap and trading volume and has a lot of development activity. Its recent listing by Binance affirms this. While it ticks the most important boxes, remember that the cryptocurrency market is speculative and highly unpredictable. It’s crucial to conduct thorough research.
How high will Pendle crypto go?
Analysts expect that in the short term, PENDLE may be corrected due to whales taking profit. However, its utility and strong fundamentals makes it a good long-term investment choice. Traders are however advised to exercise caution when investing in cryptocurrencies and avoid investing more than they can afford to lose.
