By Thor & Donovan Choy
Compiled by: Felix, PANews
Ethena recently announced the launch of the second season of Sats, which is expected to last until September 2, or until the TVL of USDe grows to $5 billion. If you missed the first season, it is not too late to participate in the second season. This article will analyze three different Ethena strategies and their potential returns in detail.
Before we dive in, let’s first understand a few basics surrounding this deal.
1. Ethena is a protocol that issues USDe, a synthetic dollar/stablecoin with yield. When you buy USDe, you can accumulate points (Sats). These points will be counted towards your eventual reward of ENA (Ethena's governance token).
2️.Pendle is a yield trading dapp that splits yield tokens into principal tokens (PT) or yield tokens (YT). PT allows users to have independent principal exposure, while YT allows independent yield exposure. Since YT does not include principal, the value of YT will tend to zero on the expiration date of the YT token. For the strategies covered in this article, the main focus is on YT.
For example: 1 USDe has an annualized yield of 17%. When you buy USDe YT tokens on Pendle, the YT tokens only contain your 17% yield + the points you accumulated on the underlying protocol (in this case, Ethena).
3. In addition to the Ethereum mainnet, Pendle is also deployed on two Layer2 blockchains, Mantle and Arbitrum.
To summarize, here are three popular airdrop mining strategies for Season 2:
Low risk: Hold USDe on Ethereum (5x sats/day), or lock for at least 7 days (20x sats/day)
Medium Risk: Buy USDe YT (Yield Token) on Pendle
High risk: Lock Ethena’s governance token ENA + buy USDe YT on Pendle at a 1:1 ratio
Estimating potential ROI requires answering a key question: How many Sats will be released by the end of Season 2? Based on the answer to this important question, it is possible to quantify the airdrop allocation and determine which strategy will provide the best return.
Note that USDe or ENA points on CEX wallets are not considered
Here, a conservative estimate of 40% growth in Sats would result in a total of 10.1 trillion Sats being released by the end of the second quarter (September 2, 2024). The second quarter would also end if the total TVL reached $5 billion. But with the current TVL level of $2.4 billion, this is unlikely to be achieved early.
The first strategy: hold and lock USDe
Now let’s calculate the return on investment of just holding USDe, which is the lowest risk strategy. Here are 2 assumptions:
5% airdrop allocation (assumed to be the same as Season 1)
Estimated total airdrop value at $20 billion FDV (currently $14.4 billion)
As shown in the table below, if you locked in $20,000 at a 20x multiple today (130 days left in the second quarter), you would have earned $5,186, an ROI of 25.93% or an APY of 72.45%.
Unlike the subsequent strategy, you can keep your entire principal as this strategy does not involve Pendle.
Second strategy: Pendle YT strategy
Now let’s look at a medium risk strategy to earn sats using Pendle’s USDe YT on Ethereum mainnet.
For the same $20,000 fund (but different term, 92 days), you will get a net return of about $23,700, which is about 4 times that of the first strategy, with an ROI of 118.55% and an APY of 331.22%. It is worth noting that the YT value tends to zero at maturity, so the $20,000 principal will be deducted.
Please note that the expected returns in the following calculations are based on Pendle’s current leverage. YT leverage is affected by YT market demand and the respective expiration dates of the Pendle pools.
Ethereum Pendle Pool
If the same strategy is deployed on the Arbitrum Pendle pool, the ROI and APY are slightly lower. This difference is also due to the different YT leverage levels of these funds.
Decision Pendle 池
You can also choose to deploy the same strategy on a Mantle or Zircuit Pendle pool.
The third strategy: Buy ENA YT + USDe YT
Finally, let’s look at the riskiest strategy, which evenly divides funds between locking ENA and purchasing Pendle’s USDe YT.
Why all the complexity? Because every user who locks ENA for at least 50% of their total USDe holdings in their wallet will receive 50% of the rewards. By holding YT-ENA and YT-USDe in the same wallet, the total YT-USDe rewards in both pools will be increased by 50%.
This may also be the strategy of the smartest YT traders, who make full use of the airdrop rewards they received in Season 1 to obtain higher sats accumulation efficiency in Season 2.
As you can see, this strategy yields the highest returns on Pendle (Arbitrum). The ROI is 162.56% and the APY is 454.17%. This higher reward is commensurate with the higher risk that traders take by having to lock up ENA.
Arbitrum USDe pool and Ethereum ENA pool
Related reading: Ethena Research Report: Where does USDe’s 27% annualized return come from?
