Be wary of discount rate risk: the mechanics and risks of AAVE, Pendle, Ethena's PT Leveraged Yield Flywheel

Written by: @Web3_Mario

Abstract: Recently, the work has been a little busy, so the update has been delayed for a while, and now the frequency of weekly updates is resumed, and I would like to thank you for your support. This week, we found that there is an interesting strategy in the DeFi space that has received a lot of attention and discussion, that is, using Ethena's staking yield certificate sUSDe and PT-sUSDe in Pendle as the source of income, and using the AAVE lending protocol as the source of funds to carry out interest rate arbitrage and obtain leveraged income. Some DeFi Kols on the X platform have made more optimistic comments about this strategy, but I think the current market seems to ignore some of the risks behind this strategy. Therefore, I have some experience to share with you. In general, AAVE+Pendle+Ethena's PT leveraged mining strategy is not a risk-free arbitrage strategy, in which the discount rate risk of PT...

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