DeFi trader rides EigenLayer airdrop hype to secure 40% yield

DeFi trader rides EigenLayer airdrop hype to secure 40% yield
Michael Patryn, who goes by pseudonym 0xSifu, stands to earn a 40% yield on $2.8m in Ether. Credit: Andrés Tapia
  • Many people try to maximise their "points" for the upcoming EigenLayer airdrop.
  • One DeFi trader, Michael Patryn, is taking the other side of the trade.
  • He stands to earn a 40% yield on $2.8m in Ether.

EigenLayer continues to grow, with over $8.4 billion in deposits after announcing a raise of $100 million from a16z earlier this month.

There are already a slew of liquid restaking protocols whose sole purpose is to take staked Ether and deposit it into EigenLayer to earn points. Points are expected to convert to tokens sometime in the second quarter.

But for those who don’t want to chase the allure of an airdrop, EigenLayer inadvertently provides some very enticing yields on Ether.

DeFi trader Michael Patryn, who goes by pseudonym 0xSifu, is one of those taking advantage of these high yields, specifically the 40% fixed annual percentage yield available on Pendle, a yield trading market.

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Patryn was the co-founder of QuadrigaCX, a Canadian centralised crypto exchange, and was convicted of financial crimes in the United States.

He later became — under his 0xSifu pseudonym – the treasury manager for Wonderland, a popular DeFi protocol. The protocol’s token TIME crashed in January 2022 after Patryn’s identity was revealed.

When investors deposit a liquid restaking token on Pendle, the token is split into a principal token and yield token. The yield token represents the yield component and EigenLayer points for one liquid restaking token, and the principal token represents the principal portion of one liquid restaking token.

Because users are piling into the yield token to receive points for EigenLayer’s airdrop, by taking the other side of this trade, Patryn is earning a 40% fixed annual percentage yield on his Ether deposits.

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The contracts for this liquid restaking token market on Pendle expires on April 25, so although the annual percentage yield is 40%, Patryn stands to increase his Ether holdings by around 5.8% by the contracts expiry.

Patryn now owns 875 Ether worth of these principal tokens, some $2.8 million.

Gearbox also begins riding the EigenLayer wave

Another protocol, Gearbox, which provides users onchain leverage, offers a 22% annual percentage yield for Ether depositors as a result of EigenLayer airdrop hype.

Because demand for EigenLayer points is high, investors have been flocking to Gearbox to borrow Ether, which lets them purchase more liquid restaking tokens.

The surge in investor demand for the Gearbox strategy has utilised most of the Ether in the lending pool, causing the yield for supplying Ether to skyrocket to 22%.

Since launching their leverage product focused on liquid restaking tokens on February 18, more than 12,900 Ether — worth about $40 million— has been restaked with Gearbox.

GEAR, the governance token of Gearbox, has risen 181% in the last week, reaching a price of $0.26.

GEAR has increased in price 181% in the last week

That is an over 600% increase from GEAR’s all-time low in September 2023 and 15% from its all-time high of $0.30 in December 2022.

The price of Pendle’s governance token, PENDLE, has also significantly benefited from the EigenLayer hype.

The token is up 126% since the start of the year as the total value of crypto assets deposited in the protocol, mainly liquid restaking token eETH, reached over $1.69 billion.

Got a tip about DeFi? Reach out at ryan@dlnews.com.