Parsec Weekly #30

Your weekly dose of DeFi and NFT's, brought to you by Parsec

Parsec Research

and

Charlie

Jul 02, 2023

DeFi Market Overview

-chulie

The Pendle Wars

Pendle is a venue for yield trading which has enjoyed strong TVL growth since the start of 2023 along with a healthy dose of CT hype. This momentum has largely been catalyzed by the burgeoning LSD sector as Pendle allows users to purchase assets at a discount (akin to zero coupon bonds), generate a fixed yield and speculate on the yield of some yield generating asset (akin to interest rate swaps).

Similar to veCRV, vePENDLE holders can boost LP rewards, direct emissions and receive protocol revenue with longer lockers enjoying greater benefits. Due to this ve model, liquid vePENDLE wrappers like Equilibria and Penpie are becoming all the rage. Combined they account for ~37% of all vePENDLE and are competing to accumulate as much voting power as possible. Like vlCVX, we could see a bribe market emerge for vote locked EQB and PNP holders as they’ll hold significant voting power to direct emissions (while also collecting a portion of revenue generated by their locked vePENDLE).

As an LP it makes sense to use Equilibria or Penpie to access max boosted yields and farm EQB/PNP on top, what is unclear is whether the vePENDLE voting power they are competing for will ultimately be valuable. Surely protocols would rather bribe liquidity for their vanilla ERC-20 using Aura or Convex which leaves larger LPs as the only potential bribers as they seek to direct emissions to the vaults they’re farming. Ultimately whether PNP, EQB or both emerge to be winners, Pendle looks to be the principal beneficiary as these external token incentives drive further TVL growth, volumes and supply locked.

TUSD

TUSD has been at the centre of many a tweeter’s focus this past week.

The Aave v2 TUSD market is heavily skewed towards borrows with one particular address whom we will endearingly refer to henceforth as the TUSD Shortor being short $4m of TUSD against USDC collateral. This position opened following this tweet, but TUSD has been under the microscope of market participants since their announcement that TUSD would no longer mint via PrimeTrust.

While certain participants claim to have had difficulty minting TUSD, Binance has minted $1bn+ of TUSD since the announcement. They also added TUSD staking for the Maverick launchpool which has locked up ~16% of TUSD supply. Some speculate this was to create demand for TUSD and reduce supply into lending markets. This is unclear but it will certainly be interesting to see where this large pool of TUSD flows once the launchpool comes to an end in 8 days. Market forces would suggest a large influx into Aave v2, greatly expanding amount available to borrow which could potentially put pressure on the TUSD peg.

Here’s a great TUSD layout to monitor the situation as it unfolds: https://app.parsec.finance/layout/alto/US3EbxjI