A complex decentralized finance (DeFi) strategy combining leveraged lending, fixed-rate yield tokens, and stablecoin arbitrage has surged in popularity—but analysts warn its “low-risk” label may overlook critical vulnerabilities.
The PT Leveraged Yield Strategy Explained
The strategy hinges on three major DeFi protocols:
Ethena – A yield-generating stablecoin protocol that captures funding rates from perpetual futures markets, issuing sUSDe as a yield-bearing token.
Pendle – A fixed-rate protocol that splits yield tokens like sUSDe into Principal Tokens (PT, akin to zero-coupon bonds) and Yield Tokens (YT).
AAVE – A lending platform where users collateralize assets to borrow funds, amplifying leverage.
How It Works:
Users convert sUSDe into PT-sUSDe via Pendle, locking in a fixed yield.
PT-sUSDe is deposited into AAVE as collateral to borrow stablecoins (e.g., USDe), repeating the process to increase leverage.
Returns depend on three variables: PT-sUSDe’s base yield, leverage ratio, and borrowing costs on AAVE.
Market Adoption: Whales Dominate
The strategy gained traction after AAVE began accepting PT assets as collateral, unlocking deeper liquidity. Currently, AAVE supports two PT pools:
PT-sUSDe (July expiry): ~$450M supplied by 78 addresses.
PT-eUSDe (May expiry): Total supply ~$1B.
Leverage and Returns:
PT-sUSDe’s max loan-to-value (LTV) in AAVE’s “E-Mode” is 88.9%, enabling ~9x leverage.
At peak leverage, theoretical APY hits 60.79% (excluding Ethena’s point rewards).
Whale Activity:
Top participants employ aggressive leverage:
0xc693… 9814: 9x leverage, $10M principal.
0x5b305… 8882: 6.6x leverage, $7.25M principal.
analytitico. eth: 6.5x leverage, $5.75M principal.
Hidden Risks: Discount Rate Volatility
While many tout the strategy as “risk-free,” two key threats loom:
Oracle Pricing Gaps
Pendle’s PT assets trade at fluctuating discounts on secondary markets, but AAVE’s oracle initially priced them linearly (ignoring market shifts).
AAVE later adopted an off-chain oracle to reflect real-time yield changes, but abrupt rate hikes could trigger liquidations.
Liquidation Vulnerabilities
If PT yields rise sharply, PT prices drop—potentially breaching AAVE’s LTV thresholds for overleveraged positions.
AAVE’s oracle updates prices at intervals (“heartbeat”), creating lag risks during volatility.
Key Safeguards:
Near expiry, PT liquidity stabilizes, reducing slippage.
AAVE’s oracle adjusts after 1% yield deviations, offering a grace period to deleverage.
Analyst Warning: “Over-Optimism Could Backfire”
Despite bullish participation, critics argue the market underestimates risks:
“A sudden shift in sentiment or yield structure could cascade into liquidations,” warns one researcher.
Unlike Morpho (which conservatively discounts PT values), AAVE’s efficiency-focused model may amplify fragility.
Looking Ahead
The strategy’s sustainability hinges on stable yields and disciplined leverage. For now, whales dominate—but whether the ecosystem can weather a stress test remains untested.
