Before we get started, this is not a recommendation or endorsement to buy ETH or any token mentioned. It is purely for informational purposes on Pendle Finance.
Normally, we stick to strategies in DeFi which allow us to earn passively with assets we hold. However, a common strategy among DeFi investors is to buy and hold assets over the long term. Despite all you can learn trading, most will admit their strategy to dollar-cost-average (DCA) over time, has proven to be their most profitable strategy. For those of us DCAing, buying at the lowest average price is always key.
For crypto investment funds and full-time angels, there are opportunities to buy tokens at a discount OTC (over the counter). Especially during bearish markets, teams will look for long term investors who will work to support the protocol if they can secure buying tokens at a discount from a DAO or treasury. An example would be an investor buys $100,000 of X token at a 50% discount against the 30-day average price, and their tokens then vest monthly over 24 months. Sounds nice right? Get tokens at a price well below the market, and then receive those tokens (vest) over the long term and hopefully the market price is up by then, and the investor can meaningfully contribute to the DAO or project.
What gets me most excited about DeFi is taking a legacy mechanism that works, but is gated to a few, and making that available to anyone in a permissionless way. Pendle Finance is a great example of a protocol that gives any DeFi investor who’s brave enough to click, the opportunity to long cryptoassets at a discounted price!
Pendle is a permissionless DeFi yield-trading protocol, currently built on Ethereum and Arbitrum, where users can execute various yield management strategies. Pendle wraps yield-bearing tokens into SY (standardized yield tokens) and then, this SY is split into principal and yield components, PT (principal tokens) and YT (yield tokens) respectively, which allows them to be traded on a custom AMM.
- The PT is the equivalent of zero-coupon bonds
- The YT is the equivalent of coupon payments
By creating a yield market in DeFi, Pendle enables users to execute advanced yield strategies, including:
- Longing assets at a discount (what we’ll focus on today!)
- Fixed yield for low-risk, stable growth
- Longing yield
- A mix of any of the above strategies
Because Pendle removes the yield from the principal of an asset, it allows the principal asset to be purchased at a discount, in the form of PT (Principal Token) under the Discounts tab on Pendle Finance.
Pendle has impressively rebounded from a bear market low in liquidity of $5M TVL to now over $45M due to some giga-brain product design. Part of the rewards offered to Pendle liquidity providers in the AMM that makes many of their strategies possible, is the PENDLE token, which we won’t cover today because it’s not necessary to long assets at a discount using Pendle. To learn more about the PENDLE token and how it acts as the “cornerstone of value accrual mechanics and management of the protocol” go here.
Today, I’ll show how I can currently buy ETH at a 14.4% discount ($1396) while the market price is $1631/ETH.
How to Long Tokens at a Discount with Pendle Finance
Before we get started, please be…
DeFi Dad is one of the earliest power users of DeFi, having worked with early Ethereum startups going back to 2018, including Zapper.
