Ouroboros Market Update #2: Valuing EigenLayer Points, Hyperliquid's PURR, Pendle's Future Growth Avenues
Calculations on EigenLayer points, what Hyperliquid is doing with PURR, and what's next for Pendle post-LRT and Ethena. This article was first available to OLAP holders on 12 Apr'24.
Last week, we covered Ethena's and Wormhole's airdrops.
Ethena: Introducing ENA locks for Sats boost. ENA has performed well since the airdrop and is now trading at $21b FDV. The project has announced it will allow users to lock up 50% of ENA value (vs. their USDe stack) to boost their Sats earning rates by +50%. While this equally dilutes the whole Sats base, we expect there to be incremental buy-to-boost-points flow, pushing ENA higher.
Wormhole: Lock W for Monad? In contrast, W has traded weakly at $8b FDV despite rumours that locking W will result in a Monad airdrop (Monad just announced a $225m raise, backed by paradigm).
Fluid vaults: Quickly filled up. Fluid vaults did well and filled up in the first few minutes of the governance proposal to increase capacity. While all 21.6k stETH capacity is currently taken up, capacity top-ups are still coming from Instadapp Lite vaults. Borrow rates are now 36%, but we still think this is one of the best LRT farms with up to 25x Ether.fi points boost and 10x EigenLayer points boost at max leverage. The 2.5x Ether.fi points boost is the highest Ether.fi is offering (other farms at 2x) and comes from allowing weETH to be the exclusive LRT on fluid.
#1 EigenLayer Points Valuation
Actionables: Estimate your EigenLayer airdrop value, Trade EigenLayer points
EigenLayer has attracted $14.7bn or 4.1m ETH in TVL, representing 3.4% of ETH's total supply. The influx of TVL has been predominantly driven by Restaked points. While we have seen several points estimates, these primarily focus on 2 assumptions: 1) valuation and 2) airdropped %. We think there is a third assumption that matters significantly and that is TGE date. EL points can be estimated using the following formulas:
Why is the TGE date so important? Currently, there are ~6.2b outstanding points, and this is growing at ~1.6% daily. Given the high growth rate, the airdrop will be rapidly diluted (by -33% / month) with new points being introduced as time passes. This means the later the TGE, the less each EigenLayer point is worth, assuming all other assumptions stay constant. We have created a calculator (available here, can be forked) where you can input your assumptions and figure out the fair value of each point.
Trading EigenLayer points. There are several ways to acquire EigenLayer points including: 1) buying yt-LRTs on Pendle, 2) buying points on Whales Market, 3) buying tokenized points via KEP and 4) depositing LRTs into DeFi farms (see Ether.fi's DeFi page as an example). All of these are means to acquire EigenLayer (and LRT) points which can be compared to the fair value of EigenLayer points.
#2 Hyperliquid PURR + Onchain Spot Order Book
Actionables: Accept the updated Terms of Use on
http://app.hyperliquid.xyz
by EOD UTC on April 13, Watch out for memecoins launching using Hyperliquid's new product.
Launching on-chain spot order book product. Hyperliquid announced it will support native spot trading and launch two permissionless standards. HIP-1 allows users to deploy native tokens and onchain spot order books. HIP-2 allows for "Hyperliquidity", allowing users to permanently commit liquidity to a spot order book (similar to locking a LP). Essentially, we think this allows for easy creation of (meme)coins but traded using a spot orderbook.
No protocol token (yet), launching catcoin. In addition, Hyperliquid is also launching PURR, the first coin using the new infrastructure. Interestingly, 50% of the PURR supply will be proportionately rewarded to points holders, while the remaining 50% will be permanently committed to a PURR/USDC pair under HIP-2. PURR essentially will become a memecoin that loosely associates with the protocol, similar to WEN for Jupiter and YES for Baseline Markets (on Blast). For context, WEN's MCap currently trades around 12% of JUP's MCap, and 1.6% of JUP's FDV.
Hyperliquid Memecoins. We think there is a small probability that Hyperliquid can become the next pump.fun and will be watching out for memecoins launching on the platform. In this scenario, PURR would likely become the defacto coin for the infrastructure standard.
#3 Pendle's Future after LRTs and Ethena
Actionables: Watch out for new pool launches, (For Pendle holders) Watch out for new growth avenues
Pendle's LRT + Ethena fueled growth = 90+% of TVL. Pendle's TVL has grown exponentially over the past months, largely driven by LRTs and Ethena (see data here). Currently, LRTs constitute 77% and Ethena 15% of its TVL. We think the Pendle team has very effectively captured activity from these 2 trends, resulting in its large proportion of activity coming from these 2 sources. Most of the LRT TVL is expiring by Jun'24 (perhaps an indication of EigenLayer's TGE date), while Ethena largely expires in Jul'24. While some Pendle holders are worried this presents a TVL risk, we think there are other growth avenues.
There's a Season 2 for everything. Both Ether.fi and Ethena, the two largest launches in the space, have launched season 2 airdrop farms (this "airdrops-as-incentives" concept was first pioneered by Blur in 2023). We expect the other LRTs to follow suit, which prolongs LRT and Ethena farming seasons for significantly longer. As the 90+% in TVL worth of Pendle Pools expire, we expect new pools to be spun up. Moreover, once tokens are launched, it is significantly easier to attribute value of tokens (consider ETHFI estimates for yt-eETH pre vs. post launch) which could result in more activity. EigenLayer's AVS mainnet launch should also spur more speculation on AVS airdrops to LRT depositors.
Pendle x AI and more. Pendle recently launched its stTAO product, allowing users to speculate on TAO's staking yield and officially becoming (tangentially) a pick and shovel play on AI. We think Parallel's PRIME is a likely candidate for Pendle to list. 45% of Wayfinder's PROMPT token will be distributed (over 3 years) to PRIME holders who cache their tokens. While LRTs and Ethena have been a massive boost to Pendle's adoption, we are more bullish on the Pendle team's ability to capitalize on trends.
Disclosure: The opinions expressed in this research piece are solely those of the author(s) and do not constitute financial advice. Ouroboros Capital may hold position(s) in the token(s) mentioned in this research articles. These position(s) may influence the author's perspective and analysis of the token. Readers are encouraged to conduct their own research before making any investment decisions.
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