Pendle is one of the most successful DeFi protocols in this crypto cycle. Through its unique yield-splitting and trading mechanism, it has become a "price discovery venue" for yield-bearing assets. Its core mechanism divides yield-bearing assets into PT (Principal Tokens) and YT (Yield Tokens), allowing users to flexibly lock in fixed returns, amplify yield expectations, or engage in speculative arbitrage.

This article provides a detailed analysis of Pendle’s strategic applications across different market cycles (bull, bear, and sideways markets), including buying PT to lock in fixed returns, YT speculation, cross-term arbitrage, and stablecoin pool allocations. It also compares the differences between stETH, uniBTC, and stablecoin pools in coin-denominated strategies.

The Boros module further assetizes funding rates, supporting interest rate swaps, hedging, and arbitrage strategies, providing professional investors with risk management tools.

Pulse, as the first AgentFi product based on Pendle’s PT strategy, achieves dynamic allocation and auto-rollover across multi-chain PT markets through an automated optimization system, significantly lowering user barriers and improving capital efficiency.

Giza’s Swarm Finance incentive layer aims to intelligently allocate capital through standardized APR feeds, enhancing protocol liquidity and reducing governance costs.

The article explores the future development of AgentFi within the Pendle ecosystem, including stablecoin PT strategies, intelligent Auto-Rollover, and Boros strategy-based products, while also highlighting potential risks such as protocol security and market volatility.

Summary
Author: 0xjacobzhao | https://linktr.ee/0xjacobzhao

Undoubtedly, Pendle is one of the most successful DeFi protocols in this crypto cycle. While many protocols stagnated due to liquidity droughts and fading narratives, Pendle’s unique yield-splitting and trading mechanism has positioned it as a "price discovery venue" for yield-bearing assets. Through deep integration with stablecoins, LSTs/LRTs, and other yield-generating assets, it has established itself as a unique "DeFi yield infrastructure."

In the research report "DeFi’s Intelligent Evolution: From Automation to AgentFi," we systematically outlined and compared the three stages of DeFi’s intelligent development: Automation, Intent-Centric Copilot, and AgentFi. Beyond lending and yield farming—the most valuable and easily implementable scenarios—Pendle’s PT/YT yield-right trading is considered a high-priority application highly compatible with AgentFi in our advanced vision. Pendle’s unique "yield splitting + maturity mechanism + yield-right trading" architecture provides a natural space for strategy orchestration, enabling automated execution and yield optimization with richer possibilities.

1. Pendle’s Basic Principles
Pendle is the first protocol in DeFi focused on yield splitting and trading. Its core innovation lies in tokenizing and separating the future yield streams of on-chain yield-bearing assets (e.g., LSTs, stablecoin deposit certificates, lending positions), allowing users to flexibly lock in fixed returns, amplify yield expectations, or engage in speculative arbitrage.

In short, Pendle creates a secondary market for the "yield curve" of crypto assets, enabling DeFi users to trade not only "principal" but also "yield." This mechanism is highly similar to zero-coupon bonds + coupon stripping in traditional finance, enhancing pricing precision and trading flexibility for DeFi assets.

Pendle’s Yield-Splitting Mechanism
Pendle splits a yield-bearing asset (YBA) into two tradable tokens:

• PT (Principal Token, similar to a zero-coupon bond): Represents the principal value redeemable at maturity but no longer accrues yield.

• YT (Yield Token, similar to coupon rights): Represents all yield generated by the asset before maturity but becomes zero at expiration.

For example, depositing 1 ETH of stETH would be split into PT-stETH (redeemable for 1 ETH at maturity, with locked principal) and YT-stETH (capturing all staking yield before maturity).

Pendle is not merely about token splitting; it also provides a liquidity market for PT and YT through a specially designed AMM (automated market maker), akin to a secondary liquidity pool for bonds. Users can buy or sell PT or YT at any time to adjust their yield risk exposure. The price of PT is typically below 1, reflecting its "discounted principal value," while the price of YT depends on market expectations of future yield. Importantly, Pendle’s AMM is optimized for assets with maturity dates, enabling PT/YT of different tenors to form a yield curve in the market, highly similar to traditional bond markets.

It is worth noting that for Pendle’s stablecoin assets:

• PT (Principal Token, fixed-income position) is equivalent to an on-chain bond. Buying it at a discount locks in a fixed rate, and it can be redeemed 1:1 for stablecoins at maturity. It offers stable returns with low risk, suitable for conservative investors seeking certainty.

• Stablecoin Pool (liquidity mining position) is essentially AMM market-making, where LP returns come from fees and incentives. APY is highly volatile, accompanied by impermanent loss risk, making it more suitable for active investors who can tolerate volatility and seek higher returns. In markets with active trading and generous incentives, pool returns may significantly exceed PT fixed returns; in inactive markets with insufficient incentives, pool returns often underperform PT and may even incur losses due to impermanent loss.

Pendle’s PT/YT trading strategies primarily cover four paths: fixed income, yield speculation, cross-term arbitrage, and leveraged yield, catering to investors with different risk appetites. Users can buy and hold PT to maturity to lock in fixed returns, equivalent to securing a deterministic rate. Alternatively, they can buy YT to bet on rising yields or increased volatility for speculative purposes. Investors can also exploit price differences between PT/YT of different tenors for cross-term arbitrage or use PT/YT as collateral with lending protocols to amplify yield exposure.

Boros’ Funding Rate Trading Mechanism
Beyond Pendle V2’s yield splitting, the Boros module further assetizes funding rates, transforming them from passive costs in perpetual contract positions into independently priced and tradable instruments. Through Boros, investors can engage in directional speculation, risk hedging, or arbitrage opportunities. This mechanism essentially introduces traditional interest rate derivatives (IRS, basis trading) into DeFi, providing new tools for institutional capital management and robust yield strategies.

In addition to PT/YT trading, AMM pools, and Boros’ funding rate trading mechanism, Pendle V2 offers several extended features, which, while not the focus of this article, serve as important supplements to the protocol ecosystem:

• vePENDLE: A governance and incentive model based on vote-escrow mechanisms. Users lock PENDLE to obtain vePENDLE, participating in governance voting and enhancing yield distribution权重. It is core to the protocol’s long-term incentives and governance.

• PendleSwap: A one-stop asset exchange entry point, helping users efficiently switch between PT/YT and native assets, improving capital convenience and protocol composability. It is essentially a DEX aggregator rather than an independent innovation.

• Points Market: Allows users to trade various project points on secondary markets in advance, providing liquidity for airdrop capture and points arbitrage. It leans more toward speculative and topical scenarios rather than core value.

2. Pendle Strategy Panorama: Market Cycles, Risk Layering, and Derivative Expansions
In traditional financial markets, retail investment channels are primarily focused on stock trading and fixed-income wealth management products, often making it difficult to directly participate in high-threshold bond derivative trading. Similarly, in the crypto market, retail users are more receptive to token trading and DeFi lending. Although Pendle has significantly lowered the barrier for retail users to enter "bond derivative" trading, its strategies still require a high level of expertise, demanding investors to deeply analyze changes in yield asset rates under different market conditions. Based on this, we believe that during different market phases—early bull market, exuberant bull market, bearish downturn, and range-bound periods—investors should match differentiated Pendle trading strategies according to their risk preferences.

• Early Bull Market: Market risk appetite gradually recovers, borrowing demand and rates remain low, and YT on Pendle is relatively cheap. Buying YT is equivalent to betting on rising future yields. Once the market enters an accelerated upward phase, borrowing rates and LST yields will rise, driving up YT value. This is a typical high-risk, high-reward strategy suitable for investors willing to position early to capture amplified bull market gains.

• Exuberant Bull Market: Soaring market sentiment drives borrowing demand, with DeFi lending rates often climbing from single digits to 15–30% or higher, causing YT values to surge and PT to trade at significant discounts. Investors buying PT with stablecoins can lock in high rates at a discount, redeeming the underlying asset 1:1 at maturity. This实质上 constitutes "fixed-income arbitrage" in the late bull market to hedge against volatility risks. The strategy is稳健 and rational, ensuring fixed returns and principal safety during market pullbacks or bear markets, but at the cost of forgoing potential gains from holding volatile assets.

• Bearish Downturn: Market sentiment is低迷, borrowing demand plummets, rates fall sharply, YT yields approach zero, and PT performs closer to risk-free assets. Buying and holding PT to maturity means locking in a deterministic return in a low-rate environment, equivalent to building a defensive position. For conservative investors, this is a primary strategy to avoid yield volatility and preserve capital.

• Range-Bound Market: Market rates lack trend, and expectations diverge significantly, often leading to short-term mismatches or pricing deviations in Pendle’s PT and YT. Investors can engage in cross-term arbitrage between PT/YT of different tenors or capture mispriced yield rights due to market sentiment fluctuations, earning stable spread returns. Such strategies require higher analytical and execution capabilities but can yield steady returns in trendless markets.

Global Perspective: Pendle Strategy Full-Market Cycle Comparison Table

Risk Layering: Pendle Decision Tree Under稳健 vs. Aggressive Strategies
Of course, the above strategies primarily focus on稳健 returns, with the core logic being to balance risk and returns by buying PT, buying YT, or participating in stablecoin pool mining across different market cycles. For investors with higher risk appetites, more aggressive strategies such as selling PT or YT can be chosen to bet on rate trends or market mismatches. Such operations require higher professional judgment and execution, with greater risk exposure, so this article will not extensively expand on them. For reference, see the decision tree below.

Pendle Coin-Denominated Strategies: stETH, uniBTC, and Stablecoin Pool Comparison
The above analysis of Pendle strategies is based on a U-denominated perspective. The strategy focus is on how to obtain excess returns by locking in high rates or capturing rate fluctuations. Additionally, Pendle offers coin-denominated strategies for BTC and ETH.

ETH is widely considered the best标的 for coin-denominated strategies due to its ecological status and long-term value certainty: As Ethereum’s native asset, ETH is not only the settlement basis for most DeFi protocols but also has staking yield as a stable cash flow source. In comparison, BTC has no native interest rate, and its returns on Pendle rely heavily on protocol incentives, making its coin-denominated logic relatively weaker. Stablecoin pools are more suitable as defensive allocations, serving a "preservation + waiting" function.

Under different market cycles, the strategic differences among the three asset pools are significant:

• Bull Market: stETH pool is the most offensive, with YT being the best strategy for leveraged ETH accumulation; uniBTC can serve as a supplement but is more speculative; stablecoin pool吸引力 relatively declines.

• Bear Market: stETH’s low-priced YT provides core opportunities for ETH accumulation; stablecoin pool serves as the main defensive function; uniBTC is only suitable for small-scale short-term arbitrage.

• Range-Bound Market: stETH’s PT-YT mismatches and AMM fees provide arbitrage opportunities; uniBTC is suitable for short-term gambling; stablecoin pool offers稳健 supplementation.

| Asset | Source of Returns

Pendle is one of the most successful DeFi protocols in this crypto cycle. Through its unique yield-splitting and trading mechanism, it has become a "price discovery venue" for yield-bearing assets. Its core mechanism divides yield-bearing assets into PT (Principal Tokens) and YT (Yield Tokens), allowing users to flexibly lock in fixed returns, amplify yield expectations, or engage in speculative arbitrage.

This article provides a detailed analysis of Pendle’s strategic applications across different market cycles (bull, bear, and sideways markets), including buying PT to lock in fixed returns, YT speculation, cross-term arbitrage, and stablecoin pool allocations. It also compares the differences between stETH, uniBTC, and stablecoin pools in coin-denominated strategies.

The Boros module further assetizes funding rates, supporting interest rate swaps, hedging, and arbitrage strategies, providing professional investors with risk management tools.

Pulse, as the first AgentFi product based on Pendle’s PT strategy, achieves dynamic allocation and auto-rollover across multi-chain PT markets through an automated optimization system, significantly lowering user barriers and improving capital efficiency.

Giza’s Swarm Finance incentive layer aims to intelligently allocate capital through standardized APR feeds, enhancing protocol liquidity and reducing governance costs.

The article explores the future development of AgentFi within the Pendle ecosystem, including stablecoin PT strategies, intelligent Auto-Rollover, and Boros strategy-based products, while also highlighting potential risks such as protocol security and market volatility.

Summary
Author: 0xjacobzhao | https://linktr.ee/0xjacobzhao

Undoubtedly, Pendle is one of the most successful DeFi protocols in this crypto cycle. While many protocols stagnated due to liquidity droughts and fading narratives, Pendle’s unique yield-splitting and trading mechanism has positioned it as a "price discovery venue" for yield-bearing assets. Through deep integration with stablecoins, LSTs/LRTs, and other yield-generating assets, it has established itself as a unique "DeFi yield infrastructure."

In the research report "DeFi’s Intelligent Evolution: From Automation to AgentFi," we systematically outlined and compared the three stages of DeFi’s intelligent development: Automation, Intent-Centric Copilot, and AgentFi. Beyond lending and yield farming—the most valuable and easily implementable scenarios—Pendle’s PT/YT yield-right trading is considered a high-priority application highly compatible with AgentFi in our advanced vision. Pendle’s unique "yield splitting + maturity mechanism + yield-right trading" architecture provides a natural space for strategy orchestration, enabling automated execution and yield optimization with richer possibilities.

1. Pendle’s Basic Principles
Pendle is the first protocol in DeFi focused on yield splitting and trading. Its core innovation lies in tokenizing and separating the future yield streams of on-chain yield-bearing assets (e.g., LSTs, stablecoin deposit certificates, lending positions), allowing users to flexibly lock in fixed returns, amplify yield expectations, or engage in speculative arbitrage.

In short, Pendle creates a secondary market for the "yield curve" of crypto assets, enabling DeFi users to trade not only "principal" but also "yield." This mechanism is highly similar to zero-coupon bonds + coupon stripping in traditional finance, enhancing pricing precision and trading flexibility for DeFi assets.

Pendle’s Yield-Splitting Mechanism
Pendle splits a yield-bearing asset (YBA) into two tradable tokens:

• PT (Principal Token, similar to a zero-coupon bond): Represents the principal value redeemable at maturity but no longer accrues yield.

• YT (Yield Token, similar to coupon rights): Represents all yield generated by the asset before maturity but becomes zero at expiration.

For example, depositing 1 ETH of stETH would be split into PT-stETH (redeemable for 1 ETH at maturity, with locked principal) and YT-stETH (capturing all staking yield before maturity).

Pendle is not merely about token splitting; it also provides a liquidity market for PT and YT through a specially designed AMM (automated market maker), akin to a secondary liquidity pool for bonds. Users can buy or sell PT or YT at any time to adjust their yield risk exposure. The price of PT is typically below 1, reflecting its "discounted principal value," while the price of YT depends on market expectations of future yield. Importantly, Pendle’s AMM is optimized for assets with maturity dates, enabling PT/YT of different tenors to form a yield curve in the market, highly similar to traditional bond markets.

It is worth noting that for Pendle’s stablecoin assets:

• PT (Principal Token, fixed-income position) is equivalent to an on-chain bond. Buying it at a discount locks in a fixed rate, and it can be redeemed 1:1 for stablecoins at maturity. It offers stable returns with low risk, suitable for conservative investors seeking certainty.

• Stablecoin Pool (liquidity mining position) is essentially AMM market-making, where LP returns come from fees and incentives. APY is highly volatile, accompanied by impermanent loss risk, making it more suitable for active investors who can tolerate volatility and seek higher returns. In markets with active trading and generous incentives, pool returns may significantly exceed PT fixed returns; in inactive markets with insufficient incentives, pool returns often underperform PT and may even incur losses due to impermanent loss.

Pendle’s PT/YT trading strategies primarily cover four paths: fixed income, yield speculation, cross-term arbitrage, and leveraged yield, catering to investors with different risk appetites. Users can buy and hold PT to maturity to lock in fixed returns, equivalent to securing a deterministic rate. Alternatively, they can buy YT to bet on rising yields or increased volatility for speculative purposes. Investors can also exploit price differences between PT/YT of different tenors for cross-term arbitrage or use PT/YT as collateral with lending protocols to amplify yield exposure.

Boros’ Funding Rate Trading Mechanism
Beyond Pendle V2’s yield splitting, the Boros module further assetizes funding rates, transforming them from passive costs in perpetual contract positions into independently priced and tradable instruments. Through Boros, investors can engage in directional speculation, risk hedging, or arbitrage opportunities. This mechanism essentially introduces traditional interest rate derivatives (IRS, basis trading) into DeFi, providing new tools for institutional capital management and robust yield strategies.

In addition to PT/YT trading, AMM pools, and Boros’ funding rate trading mechanism, Pendle V2 offers several extended features, which, while not the focus of this article, serve as important supplements to the protocol ecosystem:

• vePENDLE: A governance and incentive model based on vote-escrow mechanisms. Users lock PENDLE to obtain vePENDLE, participating in governance voting and enhancing yield distribution权重. It is core to the protocol’s long-term incentives and governance.

• PendleSwap: A one-stop asset exchange entry point, helping users efficiently switch between PT/YT and native assets, improving capital convenience and protocol composability. It is essentially a DEX aggregator rather than an independent innovation.

• Points Market: Allows users to trade various project points on secondary markets in advance, providing liquidity for airdrop capture and points arbitrage. It leans more toward speculative and topical scenarios rather than core value.

2. Pendle Strategy Panorama: Market Cycles, Risk Layering, and Derivative Expansions
In traditional financial markets, retail investment channels are primarily focused on stock trading and fixed-income wealth management products, often making it difficult to directly participate in high-threshold bond derivative trading. Similarly, in the crypto market, retail users are more receptive to token trading and DeFi lending. Although Pendle has significantly lowered the barrier for retail users to enter "bond derivative" trading, its strategies still require a high level of expertise, demanding investors to deeply analyze changes in yield asset rates under different market conditions. Based on this, we believe that during different market phases—early bull market, exuberant bull market, bearish downturn, and range-bound periods—investors should match differentiated Pendle trading strategies according to their risk preferences.

• Early Bull Market: Market risk appetite gradually recovers, borrowing demand and rates remain low, and YT on Pendle is relatively cheap. Buying YT is equivalent to betting on rising future yields. Once the market enters an accelerated upward phase, borrowing rates and LST yields will rise, driving up YT value. This is a typical high-risk, high-reward strategy suitable for investors willing to position early to capture amplified bull market gains.

• Exuberant Bull Market: Soaring market sentiment drives borrowing demand, with DeFi lending rates often climbing from single digits to 15–30% or higher, causing YT values to surge and PT to trade at significant discounts. Investors buying PT with stablecoins can lock in high rates at a discount, redeeming the underlying asset 1:1 at maturity. This实质上 constitutes "fixed-income arbitrage" in the late bull market to hedge against volatility risks. The strategy is稳健 and rational, ensuring fixed returns and principal safety during market pullbacks or bear markets, but at the cost of forgoing potential gains from holding volatile assets.

• Bearish Downturn: Market sentiment is低迷, borrowing demand plummets, rates fall sharply, YT yields approach zero, and PT performs closer to risk-free assets. Buying and holding PT to maturity means locking in a deterministic return in a low-rate environment, equivalent to building a defensive position. For conservative investors, this is a primary strategy to avoid yield volatility and preserve capital.

• Range-Bound Market: Market rates lack trend, and expectations diverge significantly, often leading to short-term mismatches or pricing deviations in Pendle’s PT and YT. Investors can engage in cross-term arbitrage between PT/YT of different tenors or capture mispriced yield rights due to market sentiment fluctuations, earning stable spread returns. Such strategies require higher analytical and execution capabilities but can yield steady returns in trendless markets.

Global Perspective: Pendle Strategy Full-Market Cycle Comparison Table

Risk Layering: Pendle Decision Tree Under稳健 vs. Aggressive Strategies
Of course, the above strategies primarily focus on稳健 returns, with the core logic being to balance risk and returns by buying PT, buying YT, or participating in stablecoin pool mining across different market cycles. For investors with higher risk appetites, more aggressive strategies such as selling PT or YT can be chosen to bet on rate trends or market mismatches. Such operations require higher professional judgment and execution, with greater risk exposure, so this article will not extensively expand on them. For reference, see the decision tree below.

Pendle Coin-Denominated Strategies: stETH, uniBTC, and Stablecoin Pool Comparison
The above analysis of Pendle strategies is based on a U-denominated perspective. The strategy focus is on how to obtain excess returns by locking in high rates or capturing rate fluctuations. Additionally, Pendle offers coin-denominated strategies for BTC and ETH.

ETH is widely considered the best标的 for coin-denominated strategies due to its ecological status and long-term value certainty: As Ethereum’s native asset, ETH is not only the settlement basis for most DeFi protocols but also has staking yield as a stable cash flow source. In comparison, BTC has no native interest rate, and its returns on Pendle rely heavily on protocol incentives, making its coin-denominated logic relatively weaker. Stablecoin pools are more suitable as defensive allocations, serving a "preservation + waiting" function.

Under different market cycles, the strategic differences among the three asset pools are significant:

• Bull Market: stETH pool is the most offensive, with YT being the best strategy for leveraged ETH accumulation; uniBTC can serve as a supplement but is more speculative; stablecoin pool吸引力 relatively declines.

• Bear Market: stETH’s low-priced YT provides core opportunities for ETH accumulation; stablecoin pool serves as the main defensive function; uniBTC is only suitable for small-scale short-term arbitrage.

• Range-Bound Market: stETH’s PT-YT mismatches and AMM fees provide arbitrage opportunities; uniBTC is suitable for short-term gambling; stablecoin pool offers稳健 supplementation.

| Asset | Source of Returns