6. Value assessment
The project is in a mature stage, but the team is still improving its economic model and enhancing liquidity while exploring the possibility of introducing traditional finance’s interest rate swaps. We believe it has the potential to become the Uniswap of the interest rate derivatives space, a market with much greater potential than the spot market due to the participation of institutional investors and its significantly larger trading volume.
Its competitive advantage lies in being the leader in on-chain interest rate derivatives and having its own ecosystem, currently enjoying an absolute monopoly position in this space, which is still in its very early stages.
Looking at the medium to long term, not only will the on-chain spot market flourish, but the staking and restaking sectors will also experience rapid growth. With institutions showing interest in TradeFi, the on-chain derivatives market is poised for rapid expansion, with Pendle being the only current unique choice available.
7. Summary
Pendle is a blockchain project that focuses on tokenizing yields, allowing users to lock in the future yields of their crypto assets and receive them in advance. This innovative approach not only provides cryptocurrency holders with a new source of income but also introduces more liquidity and flexibility to the interest rate market. Pendle achieves this functionality through smart contract technology, enabling users to participate in the market in a decentralized and secure manner.
Pendle’s investment highlights include:
- The market space is significant, with interest rate swaps being the primary derivative market dominated by institutions. Interest rate derivatives occupy 80% of the derivative market space, with interest rate swaps accounting for 80% of that. The trading volume is immense, but in the on-chain space, this market segment has only recently been introduced by Pendle, still in its early stages.
- Pendle’s overall performance data is impressive, with its trading volume, Total Value Locked (TVL), and token price all hitting new all-time highs.
- There is a trend of traditional institutions entering the staking space, including banks, hedge funds, mutual funds, ETF issuers, or ETF brokers, all of which have a demand for hedging interest rate risks.
- The V3 version will introduce the traditional interest rate swaps market onto the blockchain, targeting a market worth trillions of dollars. We look forward to Pendle’s performance in this regard.
Although Pendle currently relies on the development of the LRT track, the LRT track alone still has the potential for exponential growth. Additionally, Pendle has the opportunity to gradually reduce its reliance on LRT in the future because it is essentially geared towards the entire market of interest rate swaps. This requires institutional involvement to help diversify its assets, which also implies a strong mutual dependency between Pendle and institutions. Therefore, Pendle is a valuable investment target, and investors are advised to pay close attention.
Note: All of the above opinions are not investment advice. If there are any inappropriate points, please feel free to leave a message to correct them.
The research report was completed in early March 2024 and revised in early April 2024. The main references and data sources are as follows:
《KEY TRENDS IN THE SIZE AND COMPOSITION OF OTC DERIVATIVES MARKETS IN THE FIRST HALF OF 2023》
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