$ETH #termmax @TermMax TermMax turned fixed rates into on-chain rates market-making, but the liquidity hurdle hasn’t been cleared yet
I broke down TermMax’s rate market-making mechanism step by step, and the conclusion is a bit split. What it’s trying to solve isn’t the borrowing demand itself, but the pricing efficiency problem of fixed-rate assets before they mature. This is completely different from the path Pendle took: Pendle splits principal and yield to source liquidity for each part, while TermMax puts rate assets of different maturities into a unified market-making curve—strategically simpler. $TERM’s main use cases right now are governance and fee discounts. Secondary-market depth is rather thin; short-term price swings follow the narrative more than they follow cash flows.
In practice, TermMax’s maturity-pool selection is indeed more diverse than I expected—placing orders and redeeming are both smooth. But for small capital, slippage isn’t low, and LP returns are very sensitive to parameter updates. There’s one detail that makes me uncomfortable: in extreme market conditions, the interest-rate curve adjustments lag noticeably, and the arbitrage window exists for longer than what the documentation says. This implies that if a market maker doesn’t have proprietary inventory, it’s hard to generate stable profits relying only on public information. Pendle handles this more maturely in its main pools—at least liquidity concentration is higher, so large in-and-out flows won’t punch through the price.
That said, from another angle, TermMax’s advantages shouldn’t be dismissed. It keeps the rolling costs of maturing assets relatively low, which suits people who don’t want to move positions frequently. That’s more user-friendly than Pendle’s active management. The issue is that the demand for on-chain fixed-rate products isn’t thick enough right now; no matter how clever TermMax’s pricing mechanism is, it still needs more real market makers to come in and deepen liquidity. Otherwise, even if the model runs smoothly, it’s still a self-reinforcing loop under low liquidity.
Looking long term, if $TERM’s value capture continues to stay at the governance layer, the ceiling will be quite obvious. TermMax needs to make fee revenue distributions or protocol income buybacks real, and also raise the transparency of the oracle and settlement processes by another level—only then might it capture the portion of funds that people care about for the interest-rate spread rather than the narrative. I’ll keep observing for now and don’t plan to add more positions yet.
I broke down TermMax’s rate market-making mechanism step by step, and the conclusion is a bit split. What it’s trying to solve isn’t the borrowing demand itself, but the pricing efficiency problem of fixed-rate assets before they mature. This is completely different from the path Pendle took: Pendle splits principal and yield to source liquidity for each part, while TermMax puts rate assets of different maturities into a unified market-making curve—strategically simpler. $TERM’s main use cases right now are governance and fee discounts. Secondary-market depth is rather thin; short-term price swings follow the narrative more than they follow cash flows.
In practice, TermMax’s maturity-pool selection is indeed more diverse than I expected—placing orders and redeeming are both smooth. But for small capital, slippage isn’t low, and LP returns are very sensitive to parameter updates. There’s one detail that makes me uncomfortable: in extreme market conditions, the interest-rate curve adjustments lag noticeably, and the arbitrage window exists for longer than what the documentation says. This implies that if a market maker doesn’t have proprietary inventory, it’s hard to generate stable profits relying only on public information. Pendle handles this more maturely in its main pools—at least liquidity concentration is higher, so large in-and-out flows won’t punch through the price.
That said, from another angle, TermMax’s advantages shouldn’t be dismissed. It keeps the rolling costs of maturing assets relatively low, which suits people who don’t want to move positions frequently. That’s more user-friendly than Pendle’s active management. The issue is that the demand for on-chain fixed-rate products isn’t thick enough right now; no matter how clever TermMax’s pricing mechanism is, it still needs more real market makers to come in and deepen liquidity. Otherwise, even if the model runs smoothly, it’s still a self-reinforcing loop under low liquidity.
Looking long term, if $TERM’s value capture continues to stay at the governance layer, the ceiling will be quite obvious. TermMax needs to make fee revenue distributions or protocol income buybacks real, and also raise the transparency of the oracle and settlement processes by another level—only then might it capture the portion of funds that people care about for the interest-rate spread rather than the narrative. I’ll keep observing for now and don’t plan to add more positions yet.