Written in front
Pendle Finance is an innovative interest rate derivatives protocol. In simple terms, it separates interest from principal by splitting interest-bearing tokens (i.e. tokens that generate income when held) into principal tokens (PT) and income tokens (YT). This mechanism allows users to choose different risk and income exposures according to their needs and manage their investments more flexibly.
In the past two years, Pendle has stood out from the fierce market competition and successfully became the well-deserved leading protocol in the LSDFi/Yield field. However, Pendle's TVL has recently dropped from nearly US$7 billion to US$3.4 billion, and the token price has also nearly halved.
This phenomenon has attracted widespread attention. Therefore, this article will analyze in detail the reasons for the decline in TVL and observe the impact on PENDLE tokens, in an attempt to summarize the future expectations of PENDLE tokens for readers’ reference.
Event Overview
According to the latest Defilama data, Pendle’s total locked-up volume (TVL) climbed to a peak of $6.7 billion on June 10. However, over the next two weeks, TVL dropped a precipitous 40%, with approximately $3 billion withdrawn from Pendle. The main reason for this significant decline is that multiple financial products on the Pendle platform have expired, causing users to stop staking and evacuate.
Pendle TVL（Source：Defillama）
Detailed analysis
Since June 26, Pendle users have withdrawn more than $3 billion in deposits, mainly from the withdrawal of Liquidity Restaking Tokens (LRT). By comparing the decline in the total locked value (TVL) of these restaking protocols and the TVL trend of Pendle, it can be found that they all reached a peak between June and July and then gradually fell back.
ether.fi TVL（Source：Defillama）
Renzo TVL（Source：Defillama）
Swell TVL（Source：Defillama）
Zircuit TVL（Source：Defillama）
The LRT liquidity on the Pendle platform has been drastically withdrawn, mainly due to the following two factors:
Expiration of products in Pendle Marketplace and AMM
The expected airdrop of re-staking projects is reduced or implemented (such as Ether.fi, Puffer, Renzo and other projects)
For example, Ether.fi is about to launch Season2 airdrop.
On June 27, Pendle's on-site products expired on a large scale (Source: Pendle official website)
Since Pendle’s total locked value (TVL) peaked on June 10, TVL has decreased by about $3 billion by July 8. This sharp decrease mainly involves the withdrawal of some particularly important market assets, including Ether.fi’s weETH, Ethena’s sUSDE, Zircuit’s token ezETH, and Renzo’s assets. The withdrawal of these assets is not just affected by a single factor, but the result of multiple factors working together.
Withdrawal of major assets
The possible reasons for the withdrawal of major assets from the market are:
1. Ether.fi’s weETH withdrawal
Ether.fi recently announced that it will launch the Season 2 airdrop, which may prompt investors to choose to cash in their profits and withdraw their funds early.
In addition, the market's lower expectations for airdrops may also cause some investors to adopt a wait-and-see attitude and choose to temporarily exit the market.
2. Ethena’s sUSDE and Zircuit’s ezETH withdrawal
The expiration of deposits for these projects also allows investors to choose to exit pledge and recover funds.
In addition, the platforms where these assets are located may face liquidity pressure, prompting investors to withdraw as soon as possible to avoid risks.
Why evacuate early?
In addition to the withdrawal of matured assets, many assets scheduled to mature in July, August, and September were also withdrawn in advance. Possible reasons are:
Fluctuations in market sentiment: In the cryptocurrency market, investor sentiment fluctuates greatly. Once unfavorable news comes out of the market, it will cause panic, resulting in a large amount of assets being withdrawn in advance.
Liquidity needs: Some investors may choose to withdraw their funds before maturity due to their own liquidity needs.
Adjustment of market expectations: Investors adjusted their investment strategies based on market and policy changes, and risk aversion increased.
Pendle daily trading volume (Source: sentio)
According to the graph below, vePendle unlock volume reached a significant peak in June and July 2024. It can be seen that the retracement time point of Pendle TVL is also related to the unlocking time point of vePENDLE. The unlocking of a large number of tokens often brings selling pressure in the market. Investors may sell in advance in anticipation of a price drop, causing the price to decline. This may be transmitted to the PENDLE token itself, causing anticipated selling pressure. A large number of unlocks will lead to an increase in the number of PENDLE tokens circulating in the market, and the price may fall if supply exceeds demand.
vePENDLE unlock status (Source: Dune)
On the other hand, the second largest PENDLE token holder, 0xb262F75dbBff55F14E2a50e2d9d751E213C81ED0, deposited more than 1 million PENDLE to Binance on July 8, worth more than $3 million ?? (The left side shows the deposit amount and price point, and the right side shows the token change amount and value)
Giant Whale Address Shipping Operation 2024.7 (Source: Mest.io)
According to on-chain data, this address has deposited multiple high-value PENDLEs to Binance for sale since February this year, totaling US$19 million, of which US$11 million was sold in April.
Historical shipments of Mest.io (Source: Mest.io)
As reflected in the token itself, the price has begun to fluctuate since before the unlocking on June 27, and recently dropped 44% from the previous high of $6.17 on June 23 to $3.45 on July 8.
PENDLE price trend (Source: Coingecko)
Chip structure analysis
On June 25, the proportion of whale users on the market was as high as 71.2%. However, by June 28, the proportion of whale users plummeted to 4.7%, almost reaching a historical low. During the same period, retail investor holdings increased from 27.1% to 92.4%. This shows that the selling behavior of giant whales has had a significant impact on retail investors, and the chip structure in the market has undergone tremendous changes.
PENDLE chip structure (Source: Dune)
Since June 30, the proportion of whale users' holdings has gradually recovered, indicating that some whale users have started to buy or build PENDLE positions again. For retail investors, this has a certain reference value. However, due to the huge selling pressure before, the number of new PENDLE buyers in the current market is small, and most of them are repeat traders.
Generally speaking, when the number of new buyers shows signs of breaking out among repeat traders, this is often a signal of a short-term breakout in the token price, and vice versa.
PENDLE price drops sharply
1. Massive selling pressure intensifies
As mentioned before, frequent high-value deposits by whales will inevitably create huge selling pressure in the market. This pressure will greatly affect the market price and cause it to fall rapidly in the short term.
The drop from $6.17 on June 23 to $3.45 on July 8 (about 44%) verifies the market’s sensitivity to such large sell orders.
2. Market sentiment is generally under pressure
In the short term, the panic mentality may continue due to the huge amount of tokens that continue to flood into the market, which will further depress the price of the currency.
The operating methods of whales are to a large extent destructive to the psychology of retail coin holders and small and medium-sized traders, and may lead to continuous panic selling.
3. Conditions for a potential market rebound
If the whale sell-off is at its peak or nearing its end, a brief period of price stability and relief may occur, after which the market may repair itself.
Once the market confirms that the whales have completed their massive sell-off, the value of the remaining tokens may gradually recover and find a new balance point.
Summary and Outlook
1. Short-term observation
At present, PENDLE tokens lack sufficient momentum, and new purchases cannot form obvious support. Therefore, in short-term operations, we should also pay attention to the risks related to the market to avoid potential losses caused by premature bottom-fishing. In contrast, long-term investors can consider building positions in batches or making fixed investments, which are relatively lower risk and more stable.
PENDLE new and old traders (Source: Dune)
Future Factors
Once the market digests these large transactions and there is no new major selling pressure or negative news impact, prices may gradually stabilize and start to rebound at the new support level.
It is necessary to pay attention to whether other whales or large coin holders show similar signs of operations.
The landing and TVL changes of restaking track targets (such as Eigenlayer) may have a certain impact on the development of Pendle. Investors should pay attention to relevant data and flexibly adjust their investment strategies. However, considering Pendle's good fundamentals, in the long run, PENDLE is still an investment target worthy of attention and selection.
Contributors: Gage / Mat / Darl
Editing and proofreading: Punko
Special thanks: Thanks to the above partners for their outstanding contributions to this issue.
