DeFi
Deciphering the rise of Pendle Finance and the Notcoin pop-up — TradingView News
Forecast
The altcoin market recently gained momentum following the approval of the Ether spot ETHUSD exchange-traded funds (ETFs) in the United States. In May, the total altcoin market cap jumped by around 20%, with ETH responsible for half of this growth.
The upcoming airdrops, which will distribute project tokens worth billions of dollars to decentralized finance (DeFi) users, have the potential to generate more excitement in the altcoin market. Major multi-billion dollar project release events, such as LayerZero, Etherfi, Blast, and zkSync, are expected by the end of Q2 2024.
Analysis
The growing hype around the liquidity buyback benefitted Pendle Finance in May. Pendle is a multichain interest derivatives protocol that allows users to separate yield-generating 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-cap DeFi projects. As of June 3, Pendle had a TVL of $6.28 billion. It has surpassed Uniswap’s TVL of 6.12 billion and now ranks sixth among DeFi protocols.
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 represented $1.4 billion in TVL.
Users can split yield-generating assets such as Renzo’s ezETH on Pendle to generate a yield token (in this case, YT ezETH) and a primary token (PT ezETH). The PT token represents the principal of the underlying asset, while the YT entitles future returns.
Every PT and YT has a due date. PTs, which typically trade at a discount, can be redeemed for the underlying asset after this date. As for YTs, they continue to generate income until the maturity date, after which the YT no longer has any value. Additionally, YT ezETH holders are eligible for airdrop allocations from the underlying asset.
PT holders, on the other hand, will not receive any airdropped tokens. YT and PT are tradable and liquid.
Airdrop farmers have been incentivized to deposit their LRTs into Pendle since the introduction of point multipliers through cash rollover protocols. These multipliers increase airdrop allocations when an asset is held in a DeFi protocol, compared to when it is in a wallet.
For example, Renzo Protocol is currently distributing a 4x multiplier on its Pendle pool – on top of the already amplified airdrop exposure of YT tokens. By purchasing YT tokens, you can obtain 117 times more Renzo drop points than by purchasing the underlying asset.
This process of maximizing future airdrop allocations is called leveraged point farming. The multiplier incentive aims to expand the utility and adoption of LRT tokens within DeFi. All major LRT protocols have incorporated a point multiplier 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 reliance on LRTs for its locked value means high exposure to a single risk. Pendle’s TVL saw a strong outflow of $1 billion in late April. This 25% drop in TVL was mainly due to the arrival of airdrop allocations from Etherfi, Ethena and Renzo.
Once a highly anticipated airdrop has been distributed, the incentive to use a trade-in protocol diminishes and many users withdraw their funds. However, the aforementioned projects have already announced second seasons of their airdrops to maintain their TVL.
Another outlier in the current market environment is Notcoin (NOT), the native token of a decentralized Telegram Mini application (DApp) called Notcoin created by Open Builders. NOT experienced a substantial price increase of over 400% from May 27 to June 3.
A mini DApp is a lightweight application integrated with major social media platforms. Notcoin can be played in Telegram without downloading additional software, significantly lowering the entry barrier. Players can earn tokens in the game NOT by simply touching the screen.
With a simple revenue model and mini DApp design, Notcoin had already attracted over 35 million users as of May 16, with 6 million daily active users before the token listing. Notcoin distributed 78% of NOT to users at launch, and the rest was allocated for strategic development of the Notcoin ecosystem.
This wide distribution makes the community NOT treat as a memecoin of the Open Network ecosystem. As of May 30, there are 1.6 million NOT holders on-chain, which is more than other large-cap memecoins such as Shiba Inu. 
The recent surge in NOT prices remains speculative. This could be due in part to the advent of more applications in the TON ecosystem, which has increased community awareness of NOT. There is a collaboration between Notcoin and a cat herding game named Catizen, which supports NOT for in-game purchases.
Catizen became a top app during Open League Season 3, an event organized by the TON Foundation to incentivize TON users. With nearly 2 million daily active users, Catizen earned 50 million Notcoin in three days and burned 10% of its NOT on May 22. Additionally, Notcoin also burned 6.9 million NOT on May 30.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research before making a decision.