Market Volatility Regression Analyzes the Arbitrage Opportunities Existing in Pendle GLP YT

Author: Sleeping in the rain

From the perspective of revenue expectations, YT is very likely to follow the rise of GLP APR, usher in a wave of rebound, and then return to normal levels (higher than the current level), which is also an opportunity in my opinion.

Are there some opportunities at the current price of Pendle GLP YT?

In the following content, I will analyze the logic of this asset opportunity from the following two perspectives:

• The operating mechanism of Pendle PT YT
• The reason for the sluggish APR of GLP and whether there is data support for bottoming out

Pendle PT YT Operation Mechanism

The value of the original asset (currency-based principal + currency-based income) within a specific time interval = PT+YT

PT stands for principal and YT stands for yield. Because at the beginning, the value of the original asset has been fixed within a certain period of time, so the price changes of PT and YT are opposite. YT will be affected by the APY/APR of the original asset itself, rising or falling. After its price changes, It will affect the price of PT. Secondly, YT decreases with time, and it will gradually be realized as the profit of the original asset and given to the holder.

To understand simply and directly, YT is affected by the APY/APR of the original asset. The increase in APY/APR of the original asset will not affect YT in essence. The price of YT is determined by market expectations and market buying and selling orders. However, what needs to be mentioned here is that if the buyer holds YT in YT, then he needs to bear the Long Yield APY loss (Implied APY>Underlying APY)/profit (Underlying APY>Implied APY) displayed by YT on the maturity date ).

The current situation of GLP is that Underlying APY is 3.19%, Implied APY is 12.3%, and Long Yield APY is -88%. This means that you are bound to lose money if you hold YT now. But why would I consider the possible arbitrage opportunities in YT-GLP? It is because of the expectation of GLP earnings.

Then, let’s talk about the second point: the reason for the sluggish APR of GLP and whether there is data support for bottoming out

The income of GLP is not as good as before. The reason is that the market confidence and the long-term sideways market caused the low transaction volume (as well as some perp DEX competition for market share through airdrop expectations and transaction mining) - from the most fundamental For the most part, GLP’s earnings expectations depend on “volatility.”

So, will GLP yields bottom out?

Now, after a new round of decline in the market, volatility has come. Regarding the previous long-term sideways trading, I feel that the main source of the sideways trading around 29k is the divergence between long and short positions in the market-of course this is my personal opinion, but we are still unable to confirm with certainty that the future market volatility will Higher, but this wave of decline finally stopped the market from becoming dead.

So, what is the current data like? Next Wednesday’s GLP APR (Arbitrum) will rise from 3.18% to 27.43%, which is due to market volatility.

This means that as long as the future rate of return of GLP Underlying APY>Implied APY, then we will be profitable by holding YT. If the market is bullish on GLP, or on market volatility, then buying YT-GLP is a good choice - although YT buyers are in a loss state when Long Yield APY is negative (now a lower position), but as long as the market is active, GLP APR/APY earnings performance will be better. The market’s expectation of a positive value will drive up the price of YT-GLP. (Another point to pay attention to is GMX v2. Although the launch of GMX v2 is mediocre in terms of token price, I think GMX has optimized the potential problems of many products in the trading experience this time, which is not bad)

Therefore, from the perspective of revenue expectations, YT is very likely to follow the rise of GLP APR, usher in a wave of rebound, and then return to normal levels (higher than the current level), which is also an opportunity in my opinion.

Thanks for reading, this is an article of interest-because I bought YT-GLP, this article is intended to analyze my buying logic, not investment advice.