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The altcoin market is gaining momentum with the recent approval of a spot Ethereum (ETH) exchange-traded fund (ETF) in the United States. In May, the overall altcoin market cap surged by about 20%, with ETH accounting for half of this growth.
The airdrop, which is expected to distribute billions of dollars worth of project tokens to decentralized finance (DeFi) users, is likely to spark further excitement in the altcoin market. Major airdrop events for multi-billion dollar valued projects such as LayerZero, Etherfi, Blast, and zkSync are expected by the end of Q2 2024.
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Hype over liquidity redeployment benefited Pendle Finance in May. Pendle is an interest derivatives multichain protocol that allows users to separate yielding token assets into principal and yield components.
PENDLE’s price and total value locked (TVL) increased by 58.6% and 50.5%, respectively, outperforming other large DeFi projects. As of June 3, Pendle’s TVL was $6.28 billion. This surpasses Uniswap’s TVL of $6.12 billion, making it currently the 6th largest DeFi protocol.
Liquid staking tokens are currently the most commonly deposited asset on Pendle and make up the top five pools with the highest TVL. Etherfi’s weETH pool alone accounted for $1.4 billion in TVL.
Users can split yield assets, such as Renzo’s ezETH, on Pendle to create a yield token (in this case YT ezETH) and a primary token (PT ezETH). PT tokens represent the principal of the underlying asset, while YT represents entitlement to future returns.
Every PT and YT has an expiration date. PT, which is generally traded at a discount, can be redeemed for the underlying asset after this day. In the case of YT, it continues to generate profits until maturity, after which YT has no value. YT ezETH holders can also receive airdrop allocations from the underlying asset.
On the other hand, PT holders will not receive airdropped tokens. Both YT and PT are tradable and liquid.
Following the introduction of point multipliers by the Liquid Restaking Protocol, airdrop farmers were incentivized to deposit LRT into Pendle. These multipliers increase the airdrop allocation when assets are held in a DeFi protocol compared to when they are held in a wallet.
For example, the Renzo Protocol is currently offering a 4x multiplier to the Pendle pool on top of the already amplified airdrop exposure in YT tokens. So, by purchasing YT tokens you can get 117 times the number of Renzo airdrop points than by purchasing the underlying asset.
This process of maximizing future airdrop allocation is called leverage point farming. The multiplier incentive aims to expand the utility and adoption of LRT tokens within DeFi. All major LRT protocols incorporate point multipliers for Pendle ranging from 2x to 4.5x. This multiplier applies to both liquidity providers and YT holders.
It is worth noting that Pendle’s dependence on LRT for a fixed value means high single-risk exposure. Pendle’s TVL recorded sharp outflows of $1 billion at the end of April. The 25% decrease in TVL is mainly due to airdrop allocations from Etherfi, Ethena, and Renzo.
Once the highly anticipated airdrop is distributed, the incentive to use the re-staking protocol decreases and many users withdraw their funds. However, the aforementioned project has already announced an airdrop for its second season to keep TVL alive.
Another outlier in the current market environment is Notcoin (NOT), the native token of the Telegram Mini decentralized application (DApp) called Notcoin, created by Open Builders. NOT saw a significant price increase of over 400% from May 27 to June 3.
Mini DApps are lightweight applications built into major social media platforms. Notcoin can be played within Telegram without downloading any additional software, significantly lowering the barrier to entry. Players cannot earn in-game tokens just by tapping on the screen.
With a simple monetization model and mini DApp design, Notcoin has already attracted more than 35 million users as of May 16, with daily active users reaching 6 million prior to the token listing. At launch, Notcoin distributed 78% of NOT to users, with the remainder allocated for strategic development of the Notcoin ecosystem.
This widespread distribution causes the community to treat NOT as an Open Network ecosystem memecoin. As of May 30, the number of on-chain NOT holders was 1.6 million, which is more than other large meme coins such as Shiba Inu (SHIB) (1.4 million), BONK (721,000), and PEPE (235,000).
NOT’s recent price surge remains speculative. This may be partly due to the emergence of more applications in the TON ecosystem, resulting in increased community awareness of NOT. Notcoin and a cat raising game called Catizen have teamed up to disable in-game purchases.
Catizen became the top application during The Open League Season 3, an event organized by the TON Foundation to provide incentives to TON users. With nearly 2 million daily active users, Catizen acquired 50 million Notcoins in 3 days and burned 10% of NOTs on May 22nd. Additionally, Notcoin burned 6.9 million NOTs on May 30th.
This article does not contain investment advice or recommendations. All investment and trading activities involve risk and readers should conduct their own research when making any decisions.