With the rapid development of decentralized finance (DeFi) and Staking, Pendle token has gradually become one of the most watched projects in the market. Especially with the gradual entry of institutional investors, the demand for Pendle and its interest rate swap products is expected to continue to increase. This article will delve into Pendle’s market potential, liquidity, token economics, and future development trends.
Pendle’s Market Potential
In the traditional financial (TradeFi) market, interest rate derivatives (IDR) are one of the products with the highest trading volume. According to the latest data, the overall derivatives market has reached US$714.7 trillion, of which interest rate derivatives have an open position of US$573.7 trillion, accounting for 80.2% of the market share. This shows the importance of interest rate derivatives in financial markets.
As a project focusing on on-chain interest rate swaps on Ethereum, Pendle has the potential to introduce traditional interest rates to the chain. As institutions pay more attention to the Ethereum pledge market, Pendle will become an important platform for institutions to conduct interest rate derivatives operations and push the potential transaction volume to hundreds of trillions.
Liquidity and Pool Growth
Currently, the liquidity of Pendle’s pool is gradually increasing, mainly focusing on the LRT (Liquidity Re-hypothecation Token) track. With the project currency issuance of the LRT track and the continued popularity of the Staking track in the future, this area will become a hot focus in the industry. According to the latest data, the total value locked (TVL) of major LRT tracks is also growing steadily, which has a direct boost to Pendle’s major pools.
Token Economics: As of March 7, 2024, Pendle’s total token volume is 258,446,028, the circulating supply is 96,950,723, and the market value is approximately US$298 million. Liquidity incentives account for 49.3% of the overall tokens, with the team accounting for 17.7% and investors accounting for 12.1%. The liquidity incentive program is expected to last until the end of 2030, which will help keep the market active.
Pendle's tokens are mainly used for governance custody, and holders can obtain a variety of functions through vePendle. The value of vePendle is proportional to the staked amount and duration of Pendle, which allows holders to participate in the governance process and receive benefits from it.
Potential use cases for organizations
As institutions gradually enter the market, the demand for Pendle will increase. Institutions may use Pendle to obtain fixed income, such as earning fixed income on stETH; or use long yields to bet on the rise of stETH yields. Additionally, institutions can leverage stETH to provide liquidity without additional risk, thereby earning even more benefits.
For example, in EigenLayer's Restaking market, as the number of depositors increases, the future yield rate will most likely decrease. In this case, institutions can choose to sell YT when yields are high to lock in gains. Such a strategy will allow them to effectively hedge future risks.
in conclusion
As a project focusing on interest rate swaps, Pendle undoubtedly has great potential in the DeFi field. As market demand grows and institutions enter the market, Pendle will become an important platform for on-chain interest rate derivatives trading. In the future, as liquidity and market size expand, Pendle may become an indispensable financial tool.
Against this background, investors should pay close attention to Pendle's developments and seize potential market opportunities. With the integration of DeFi and traditional finance, Pendle’s future will be full of endless possibilities.