Pendle Finance launches support for LP derivatives

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Key Takeaways Pendle Finance has released token returns for the Sushi LP positions. Users can now split their LP position into derivative tokens, allowing for speculation on future market movements. Derivatives such as Pendle’s Yield Tokens are increasingly becoming part of the DeFi ecosystem. Share this article

Pendle Finance introduced support for Sushi LP (SLP) tokens, allowing users to trade and cover swap fees, and speculate on the risk of impermanent loss (IL).

Pendle LP Derivatives

Pendle Finance gives users the ability to create derivatives of their Sushi Liquidity Provider (SLP) tokens. The announcement comes after Pendle managed to raise $ 3.5 million to launch the new feature in April.

SLP tokens can now be divided into two components: Ownership Tokens (OT) and Yield Tokens (YT). By buying and holding these tokens, users can gain exposure to LP positions without providing liquidity themselves, much like derivatives work in traditional finance.

Ownership tokens (OTs) represent the underlying assets used to provide liquidity to the LP position. As such, users holding OT tokens are exposed to the impermanent loss that the position may incur due to future price movements. On the other hand, yield tokens (YT) give the holder access to the fees generated by the risk-free LP position of IL.

Pendle co-founder and CEO TN Lee commented on the launch of the protocol’s new functionality, saying:

“By introducing SLP as a supported asset, we are bringing a new utility to the DeFi ecosystem. Users are now able to trade and hedge swap costs with minimal exposure to temporary losses, which was not possible before. “

The ability to split LP positions opens up new opportunities to speculate on future market movements. For example, if a trader is convinced that the return on an LP position will increase in the future, he could buy YT tokens to expose himself to the potential increase without risking IL. Conversely, a trader could hedge against IL risk by choosing to sell their OT tokens when they expect increased market volatility while keeping the YT tokens generating yield.

Currently, Pendle supports PENDLE / ETH and ETH / USDC SLP tokens, with more cash pairs planned for the future.

The DeFi ecosystem on Ethereum has continued to grow despite the market pullback earlier this year. There is increased interest in derivatives, with the leading provider of crypto-based perpetual contracts, Perpetual Protocol, launching $ 47 million fund to boost DeFi derivatives. With the launch of Token Yields, Pendle will be well positioned as the DeFi derivatives market grows. The PENDLE token has climbed over 80% following the announcement of the protocol’s new functionality.

Disclaimer: At the time of writing this feature, the author owns BTC and ETH. One or more members of the Crypto Briefing management team have invested in Pendle Finance.

This news was brought to you by ANKR, our favorite DeFi partner.

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