Yield and Risk Analysis of Pendle YT Leveraged Point Strategy

In previous articles, we explored the manifestation rate risk of AAVE's Pendle PT leveraged yield strategy. This article will continue to delve into the Pendle ecosystem, analyzing the real yield and potential risks of the YT leveraged points strategy. Taking Ethena as an example, the current potential return rate of this strategy can reach 393%, but investors still need to carefully assess the risks involved.

Leverage Attributes of YT Assets and Point Earnings

In early 2024, with LRT projects represented by Eigenlayer adopting the point mechanism to distribute rewards, the YT leveraged points strategy has attracted market attention. Users can increase their capital leverage by purchasing Pendle YT to obtain more points, thus gaining a larger share during the reward distribution.

Pendle converts yield-bearing token certificates into Principal Tokens (PT) and Yield Tokens (YT). YT represents the cumulative earning capacity of the locked yield-bearing assets during their lifetime. Since YT only receives the right to earnings and cannot redeem the principal, its price is significantly lower than that of the native asset, creating a leverage effect.

Quantitative Calculation of Point Earnings

Taking sUSDe YT as an example, holding 1 YT can earn 30 Ethena Sats points as a daily reward. The expected yield of the quantification Point needs to consider the following key parameters:

1. The total amount of points generated daily
2. The number of points that have been distributed
3. Expected airdrop ratio after the season ends
4. The price of ENA at distribution

According to the official Ethena API data and assumptions, we can estimate the total points that holding an asset worth $10,000 in YT-sUSDe may earn in the future. By combining the ENA price and the estimated reward rate, an additional APY yield of 415.8% can be calculated. After deducting the losses from the sUSDe fee rate dividends, the total APY can reach 393%.

Strategies to Reduce Yield Volatility Risk

To reduce strategic risks, the following hedging methods can be considered:

1. Short ENA when the price is relatively high to lock in the expected price at the time of profit distribution.
2. Cash out part of the airdrop value of points in advance at a third-party Point OTC exchange.
3. By shorting major assets such as BTC and ETH, partially hedge against the risk of sUSDe rate dividend yield.

In addition, Pendle's Boros product features also allow users to hedge rate risks, which is worth noting.

This article uses sUSDe as an example to introduce the yield and risk assessment methods of the YT leverage point strategy. Investors can study other targets based on this methodology and fully assess potential risks before implementing the strategy.