Amid the volatility of the crypto market, many investors miss out on passive income opportunities. This article will share a simple and stable strategy - lend stablecoins or lock in fixed income through DeFi platforms to help you steadily accumulate more crypto assets without frequent trading. This article is based on an article written by Igor Jerkovic and is compiled, compiled and written by TechFlow. (Synopsis: The market pullback is painful, more suitable for lazy U-standard financial strategies here) (Background supplement: market pullback pit people, suitable for lying flat U-standard financial strategy Vol.2 here) I am a software engineer with over 15 years of experience and have been active in the crypto industry since 2017. Currently, I am going through my third crypto cycle (currently working on the DeFi Koala project). In the process of participating in these cycles, I have discovered a common phenomenon: many of my friends always buy cryptocurrencies at the peak of each four-year cycle – usually at the top of the price – and then experience huge unrealized losses (realised losses if they sell). However, those who don't sell often keep their tokens in centralized exchanges, missing out on the opportunity to earn passive income. And even those who profit from selling often leave their stablecoins idle, waiting for prices to fall before buying. I share this because trading is really hard, but there are better ways to accumulate more crypto assets without making frequent transactions. A common mistake: ignoring passive income Through my conversations with many cryptocurrency holders, I've found that most people don't know that they can earn on the assets they hold. In this post, I will share a simple strategy to help you achieve passive income through cryptocurrency. Simple Strategy: Lend Your Stablecoins One of the easiest ways to earn passive income is to earn interest by lending your stablecoins (such as USDC) to borrowers who need them. Decentralized finance (DeFi) lending platforms often require overcollateral, which means that borrowers must deposit collateral higher than the borrowed amount. If the value of their collateral is close to the level of the borrowed amount plus interest, they face liquidation and the lender is automatically repaid. A potential drawback? Interest rate fluctuations. For example, over the past year, the average annualized return (APR) on USDC on the Aave platform was 6.28%. This means that if you deposit $10,000, you can earn $628 in interest — compared to 0% if you leave your funds on the exchange. Aave's one-year average supply rate But the problem is that interest rates fluctuate. A Better Strategy: Locking in Fixed Income That's when Pendle became a solution. Pendle allows you to lock in fixed income for a fixed term, eliminating the uncertainty caused by interest rate fluctuations. For example, in December 2024, Ethena's floating annualized return (APR) was as high as 27%. As tempting as it sounds, this rate is not stable – at the time of writing, it has fallen to 9%. To solve this problem, I used Pendle to lock in a fixed annualized yield of 20.5% for six months. How Pendle works Pendle splits yield tokens into two types: Principal Tokens (PT): The value grows steadily over time. Yield Tokens (YT): Offer floating interest but fade as the maturity date approaches. In December 2024, I converted USDC to sUSDe via CowSwap, a decentralized exchange aggregator that generally offers better exchange rates than Uniswap, and then purchased sUSDe PT tokens with an expiration date of May 29, 2025. By May 29, 2025, I will achieve an annualized rate of return of 20.5%. This means that if I invest $10,000, I will receive $10,951 at maturity. In addition, if I need to withdraw funds in advance, I can also realize part of the gains. Note: Since I'm only locked in for six months, my real annualized return is around 9.5%. If I lock in for an entire year, I'll get the full 20.5% gain. Pendle's locked gains on December 12, 2024 After expiration, I may continue to reinvest with Pendle, but will also consider some other DeFi opportunities depending on market conditions. Pendle actually tokenizes a fixed-income DeFi strategy, similar to zero-coupon bonds, giving investors a tool to lock in fixed income. Step-by-Step Guide: How to Use Pendle to Lock Fixed Income Before you begin, it is assumed that you have: Know what a crypto wallet is. Know how to transfer tokens from centralized exchanges to external self-custodial wallets. Tip: To interact with DeFi, you'll need a self-custodial wallet (e.g. MetaMask) or a hardware wallet (e.g. Ledger connected via MetaMask). Step 1: Connect to Pendle Open the official website of Pendle and click "Connect Wallet". Select MetaMask (if this is the wallet where your private key is stored). A window will pop up asking you to connect to the website (this step allows Pendle to look at your public key address and suggest signing the necessary transactions) – click "Connect". Step 2: Choose Fixed Income At the time of writing, Ethena's stablecoin (USDe) has a floating interest rate of 9% when staked to sUSDe. But with Pendle, you can lock in an annualized yield of 16.75% until March 27, 2025. Click the PT 16.75% button. You will see historical interest rate fluctuations – interest rates depend on market conditions. Select the "PT" option (not "YT"), and then click "Buy PT". Enter the amount - for example, I set it to 10,000 USDe. The user interface will show the expected return: By March 27, 2025, I can recover 10,115.4 USDe. This equates to an annualized rate of return of 16.51% (annualized return), or 1.154% return in 27 days. On the same screen, you can see how interest rates fluctuate over time. Typically, when the market is extremely bullish and many people want to borrow stablecoins, lending rates go up and lenders earn higher yields. But once you lock in an interest rate at Pendle, this rate will remain the same, unaffected by market fluctuations. Since USDe is an ERC-20 token, you need to authorize Pendle to use it in your wallet before you can perform subsequent operations. Click "Approve USDe". The MetaMask window will pop up — sign the transaction. This step...
The content is for reference only, not a solicitation or offer. No investment, tax, or legal advice provided. See Disclaimer for more risks disclosure.
Passive income without trading: A step-by-step guide to using Pendle
Amid the volatility of the crypto market, many investors miss out on passive income opportunities. This article will share a simple and stable strategy - lend stablecoins or lock in fixed income through DeFi platforms to help you steadily accumulate more crypto assets without frequent trading. This article is based on an article written by Igor Jerkovic and is compiled, compiled and written by TechFlow. (Synopsis: The market pullback is painful, more suitable for lazy U-standard financial strategies here) (Background supplement: market pullback pit people, suitable for lying flat U-standard financial strategy Vol.2 here) I am a software engineer with over 15 years of experience and have been active in the crypto industry since 2017. Currently, I am going through my third crypto cycle (currently working on the DeFi Koala project). In the process of participating in these cycles, I have discovered a common phenomenon: many of my friends always buy cryptocurrencies at the peak of each four-year cycle – usually at the top of the price – and then experience huge unrealized losses (realised losses if they sell). However, those who don't sell often keep their tokens in centralized exchanges, missing out on the opportunity to earn passive income. And even those who profit from selling often leave their stablecoins idle, waiting for prices to fall before buying. I share this because trading is really hard, but there are better ways to accumulate more crypto assets without making frequent transactions. A common mistake: ignoring passive income Through my conversations with many cryptocurrency holders, I've found that most people don't know that they can earn on the assets they hold. In this post, I will share a simple strategy to help you achieve passive income through cryptocurrency. Simple Strategy: Lend Your Stablecoins One of the easiest ways to earn passive income is to earn interest by lending your stablecoins (such as USDC) to borrowers who need them. Decentralized finance (DeFi) lending platforms often require overcollateral, which means that borrowers must deposit collateral higher than the borrowed amount. If the value of their collateral is close to the level of the borrowed amount plus interest, they face liquidation and the lender is automatically repaid. A potential drawback? Interest rate fluctuations. For example, over the past year, the average annualized return (APR) on USDC on the Aave platform was 6.28%. This means that if you deposit $10,000, you can earn $628 in interest — compared to 0% if you leave your funds on the exchange. Aave's one-year average supply rate But the problem is that interest rates fluctuate. A Better Strategy: Locking in Fixed Income That's when Pendle became a solution. Pendle allows you to lock in fixed income for a fixed term, eliminating the uncertainty caused by interest rate fluctuations. For example, in December 2024, Ethena's floating annualized return (APR) was as high as 27%. As tempting as it sounds, this rate is not stable – at the time of writing, it has fallen to 9%. To solve this problem, I used Pendle to lock in a fixed annualized yield of 20.5% for six months. How Pendle works Pendle splits yield tokens into two types: Principal Tokens (PT): The value grows steadily over time. Yield Tokens (YT): Offer floating interest but fade as the maturity date approaches. In December 2024, I converted USDC to sUSDe via CowSwap, a decentralized exchange aggregator that generally offers better exchange rates than Uniswap, and then purchased sUSDe PT tokens with an expiration date of May 29, 2025. By May 29, 2025, I will achieve an annualized rate of return of 20.5%. This means that if I invest $10,000, I will receive $10,951 at maturity. In addition, if I need to withdraw funds in advance, I can also realize part of the gains. Note: Since I'm only locked in for six months, my real annualized return is around 9.5%. If I lock in for an entire year, I'll get the full 20.5% gain. Pendle's locked gains on December 12, 2024 After expiration, I may continue to reinvest with Pendle, but will also consider some other DeFi opportunities depending on market conditions. Pendle actually tokenizes a fixed-income DeFi strategy, similar to zero-coupon bonds, giving investors a tool to lock in fixed income. Step-by-Step Guide: How to Use Pendle to Lock Fixed Income Before you begin, it is assumed that you have: Know what a crypto wallet is. Know how to transfer tokens from centralized exchanges to external self-custodial wallets. Tip: To interact with DeFi, you'll need a self-custodial wallet (e.g. MetaMask) or a hardware wallet (e.g. Ledger connected via MetaMask). Step 1: Connect to Pendle Open the official website of Pendle and click "Connect Wallet". Select MetaMask (if this is the wallet where your private key is stored). A window will pop up asking you to connect to the website (this step allows Pendle to look at your public key address and suggest signing the necessary transactions) – click "Connect". Step 2: Choose Fixed Income At the time of writing, Ethena's stablecoin (USDe) has a floating interest rate of 9% when staked to sUSDe. But with Pendle, you can lock in an annualized yield of 16.75% until March 27, 2025. Click the PT 16.75% button. You will see historical interest rate fluctuations – interest rates depend on market conditions. Select the "PT" option (not "YT"), and then click "Buy PT". Enter the amount - for example, I set it to 10,000 USDe. The user interface will show the expected return: By March 27, 2025, I can recover 10,115.4 USDe. This equates to an annualized rate of return of 16.51% (annualized return), or 1.154% return in 27 days. On the same screen, you can see how interest rates fluctuate over time. Typically, when the market is extremely bullish and many people want to borrow stablecoins, lending rates go up and lenders earn higher yields. But once you lock in an interest rate at Pendle, this rate will remain the same, unaffected by market fluctuations. Since USDe is an ERC-20 token, you need to authorize Pendle to use it in your wallet before you can perform subsequent operations. Click "Approve USDe". The MetaMask window will pop up — sign the transaction. This step...