why do people use the YT route?
i think it is pretty simple to explain.
it caters to two important set of players
• big players who don't want to risk most of their funds • small players who don't have much funds to risk.
a $300 worth of alSUD gives you 33787 YT tokens.
1 YT token is equivalent to 1 USDC staked in the @almanak vault.
that is a 100x leverage. it would be as if you were commiting 30k worth of USDC to the almanak vault.
a similar case study is seen with @solsticefi on exponent.
$100 worth of eUSX gives us 2868 YT tokens
$100 worth of USX gives us 2500 YT tokens
For YT-eUSX, this would give us the exposure of nearly 3k worth of eUSX while YT-USX gives us an exposure of 2500 USX
At weighted deposits, this leverage becomes significant.
for almanak, 20k in YT gives you an exposure to 2 million worth of USDC.
for solstice, you getting between a 25x-30x leverage which is a fair trade off imo.
imagine locking 2 million worth of USDC and almanak rugs?
it will hurt way more than 20k.
Like @thelearningpill stated, the YT game isn't a degen play, it is actually calculated risks.
i do think it could be both though, all boils down to your risk appetite.
as always, see you on the side that prints.
Everyone talks about yield farming, but almost no one understands yield trading.
Exponent Finance and Pendle have built entire markets around it.
If you want to play in these markets, there are key principles you must understand.
Pendle is the yield market for the EVM while Exponent is the yield market for Solana.
Both let you trade yield like it is its own asset.
To understand how they work, start with four concepts:
• PT
• YT
• Implied APY
• Maturity
PT (Principal Token):
PT is simply the underlying asset without any of its future yield.
Let's say you deposit stUSDe into Pendle and it splits into PT-stUSDe and YT-USDe.
Basically, you buy PT at a discount and redeem the full asset at maturity.
It is essentially a crypto version of a discounted bond.
YT (Yield Token):
YT is the future yield you earn on the asset until maturity.
Besides the Yield, people buy YT as so form of leverage in campaigns. It gives you more exposure with minimal financial commintment.
Study projects like @bulktrade, @hylo_so, @solsticefi and @almanak
YT is where the upside and the pain live.
If the market underprices future yield, YT prints.
If market expectations shift or new incentives launch, YT can collapse.
YT-eUSX is the perfect example. It crashed once the YT-USX pool released with a 30x multiplier.
Implied APY:
This is the yield traders "believe" the asset will generate.
If actual yield comes in higher than implied APY, YT becomes extremely profitable.
If PT trades at a heavy discount, implied APY goes up.
It is the same logic as forward interest rates in bonds.
If you understand implied APY, you'd could actually find some loopholes to exploit.
Maturity:
Here, PT redeems for the full underlying asset while YT stops earning yield.
Any YT token held into maturity goes to zero.
This is why YT trading is not passive income. It is a calculated risk trade.
I learned that the hard way. I lost $300 in Solstice and Almanak respectively.
@teddi_speaks and @ProofOfTravis also took losses on YT-eUSX.
When you play with yield markets, just accept that you could ignore significant losses.
Just be certain the tradeoff is worth it.
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