Major asset withdrawal, coin price halved, what happened to Pendle?

Authors: Gage, Mat, Darl, WolfDAO

Introduction

Pendle Finance is an innovative interest rate derivatives protocol. Simply put, it achieves the separation of principal and interest by splitting yield-bearing tokens (i.e., tokens that generate returns) into principal tokens (PT) and yield tokens (YT). This mechanism allows users to choose different risk and return exposures based on their needs, enabling more flexible management of their investments.

Over the past two years, Pendle has stood out in fierce market competition and has successfully become the undisputed leader in the LSDFi/Yield space. However, recently, Pendle's TVL has dropped from nearly $7 billion to $3.4 billion, and the token price has nearly halved.

This phenomenon has attracted widespread attention. Therefore, this article will analyze the reasons for the decline in TVL in detail and observe its impact on the PENDLE token in an attempt to summarize the future expectations for the PENDLE token for readers' reference.

Event Overview

According to the latest data from Defilama, on June 10, Pendle's total locked value (TVL) peaked at $6.7 billion. However, in the following two weeks, the TVL sharply declined by 40%, with approximately $3 billion withdrawn from Pendle. The main reason for this significant drop was the expiration of multiple financial products on the Pendle platform, leading users to choose to stop staking and withdraw en masse.

Pendle TVL (Source: Defillama)

Detailed Analysis

Since June 26, Pendle users have withdrawn over $3 billion in deposits, primarily due to the withdrawal of liquidity re-staking tokens (LRT). By comparing the decline in total locked value (TVL) of these re-staking protocols with Pendle's TVL trend, it can be observed that they both peaked and gradually retreated between June and July.

ether.fi TVL (Source: Defillama)

Renzo TVL (Source: Defillama)

Swell TVL (Source: Defillama)

Zircuit TVL (Source: Defillama)

The significant withdrawal of LRT liquidity from the Pendle platform is mainly influenced by the following two factors:

· Expiration of products in Pendle's on-chain market and automated market makers (AMM)

· Decreased or realized expectations for airdrops from re-staking projects (such as Ether.fi, Puffer, Renzo, etc.)

· For example, Ether.fi is about to launch its Season 2 airdrop.

Mass expiration of Pendle's on-chain products on June 27 (Source: Pendle Official Website)

Since Pendle's total locked value (TVL) peaked on June 10, by July 8, the TVL had decreased by approximately $3 billion. This sharp decline mainly involved 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 solely influenced by a single factor but is the result of multiple factors acting together.

Major Asset Withdrawals

The possible reasons for the withdrawal of major assets in the market are:

1. Withdrawal of Ether.fi's weETH

Ether.fi recently announced the upcoming Season 2 airdrop, which may prompt investors to realize profits and withdraw funds early. Additionally, the decreased expectations for airdrops may lead some investors to adopt a wait-and-see attitude, resulting in temporary market exits.

2. Withdrawal of Ethena's sUSDE and Zircuit's ezETH

The expiration of deposits in these projects has also led investors to choose to exit staking and recover funds. Moreover, the platforms where these assets are located may face liquidity pressures, prompting investors to withdraw quickly to avoid risks.

Why Withdraw Early?

In addition to the withdrawal of expired assets, many assets scheduled to expire in July, August, and September have also been withdrawn early. Possible reasons include:

· Market sentiment fluctuations: In the cryptocurrency market, investor sentiment can be highly volatile. Once negative news emerges, it can trigger panic, leading to a large-scale withdrawal of assets.

· Liquidity needs: Some investors may choose to withdraw funds early due to their own liquidity requirements.

· Adjustments in market expectations: Investors may adjust their investment strategies based on market and policy changes, leading to increased risk aversion.

Pendle's daily trading volume (Source: sentio)

According to the situation shown in the chart below, the unlocking volume of ve Pendle reaches a significant peak in June and July 2024. It can be seen that the timing of Pendle's TVL retracement is also somewhat correlated with the unlocking time of ve PENDLE. A large number of token unlocks often bring selling pressure to the market, and investors may sell early due to expectations of price declines, leading to price drops. This may cause preemptive selling pressure on the PENDLE token itself. Additionally, a large number of unlocks increase the circulating supply of PENDLE tokens, which may lead to price declines in a situation of oversupply.

vePENDLE unlocking situation (Source: Dune)

On the other hand, the second-largest whale user holding PENDLE, 0xb262F75dbBff55F14E2a50e2d9d751E213C81ED0, deposited over 1 million PENDLE into Binance on July 8, worth over $3 million (the left side shows the deposit quantity and price points, while the right side shows the changes in token quantity and value).

Whale address selling operation July 2024 (Source: Mest.io)

On-chain data shows that this address has been continuously depositing multiple high-value PENDLE tokens to Binance for sale since February this year, totaling $19 million, with sales as high as $11 million in April.

Whale historical selling situation (Source: Mest.io)

Reflected in the token itself, the price began to show unusual movements before the unlocking on June 27, recently dropping from a high of $6.17 on June 23 to $3.45 on July 8, a decrease of 44% in a short time.

PENDLE price trend (Source: Coingecko)

Chip Structure Analysis

On June 25, the proportion of holdings by whale users in the market was as high as 71.2%, but by June 28, the proportion of whale users plummeted to 4.7%, almost reaching a historical low. During the same period, the proportion of retail investors increased from 27.1% to 92.4%. This indicates that the selling behavior of whales had a significant impact on retail investors, resulting in a dramatic change in the chip structure in the market.

PENDLE chip structure (Source: Dune)

Since June 30, the proportion of holdings by whale users has gradually rebounded, indicating that some whale users have begun to accumulate or build positions in PENDLE again. For retail investors, this has certain reference value. However, due to the previous significant selling pressure, the number of new PENDLE buyers in the current market is relatively low, mostly consisting of repeat traders.

Generally, when the number of new buyers shows signs of breaking through among repeat traders, it often signals a short-term breakthrough in token prices, and vice versa.

PENDLE Price Plummet

1. Intensified Large-Scale Selling Pressure

As previously mentioned, the frequent high-value deposits by whales will inevitably create enormous selling pressure in the market, which will greatly affect market prices, causing them to drop rapidly in the short term.

The drop from $6.17 on June 23 to $3.45 on July 8 (approximately 44%) verifies the market's sensitivity to such large sell orders.

2. General Market Sentiment Under Pressure

In the short term, the continuous influx of large amounts of tokens into the market may maintain a panic mindset, further driving down the token price.

The operational tactics of whales largely disrupt the psychology of retail holders and small to medium traders, potentially leading to ongoing panic selling.

3. Conditions for Potential Market Rebound

If the whale selling peaks or approaches its end, a brief period of price stability and easing may occur, followed by a potential self-repair of the market.

Once the market confirms that whales have completed large-scale selling, the value of the remaining tokens may gradually recover and find a new equilibrium.

Summary and Outlook

1. Short-Term Observation

Currently, the PENDLE token lacks sufficient momentum, and new buying volume cannot form significant support. Therefore, in short-term operations, it is also important to pay attention to the related risks in the broader market to avoid potential losses from premature bottom-fishing. In contrast, long-term investors may consider accumulating positions in batches or through dollar-cost averaging, which carries relatively lower risk and is more prudent.

PENDLE new and old traders situation (Source: Dune)

Future Factors

· Once the market digests these large transactions and there are no new significant selling pressures or negative news impacts, prices may gradually stabilize and begin to rebound at new support levels.

· Attention should be paid to whether other whales or large holders exhibit similar operational signs.

The landing of restaking projects (such as Eigenlayer) and changes in TVL may have certain impacts on Pendle's development. Investors should monitor relevant data and flexibly adjust their investment strategies. However, considering Pendle's solid fundamentals, in the long run, PENDLE remains an investment target worth paying attention to and choosing.