Introduction

In a previous report we highlighted the potential of Ethereal, a next gen (perp) DEX launching as L3 on the Ethena network. Points farming is now live and offers you exposure to an upcoming airdrop scheduled for May 2025. As Ethena previously was very accurate with their token scheduling, chances are that the Ethereal airdrop will happen on time as well. But how to best farm these points? This article introduces a method to maximize points farming and additional returns by combining it with Pendle and lvlUSD.

What is lvlUSD?

lvlUSD is a stablecoin designed for the DeFi ecosystem, specifically a yield-bearing token that aims to provide users with high returns while maintaining stability. It is fully collateralized by USDC and USDT, the two most established stablecoins to date.

The viability of the lvlUSD points farm is not subject of this report as only the Pendle PT (forfeiting your points) will be used to hedge the Pendle YT for eUSDE with the same maturity date. So the focus will lie on risk considerations.

How Does It Work?

lvlUSD generates yield by depositing its backing assets (USDC and USDT) into lending protocols like Aave and Morpho. Additionally, a portion of the lending receipt tokens is restaked on protocols like Symbiotic, enhancing yield potential. Users can stake lvlUSD to receive slvlUSD, which accrues yield by appreciating in value, currently offering an APY of 8.32% as of March 2025.

By incentivizing people with their XP program to not stake their lvlUSD, the yield that stakers accrue is potentially higher than the yield you could earn on the open market. As an example:

• Only 50% of lvlUSD staked
• 100% of backing assets used to farm at 8%
• The 8% yield of 100% of backing is distributed to 50% of stlvlUSD (staked lvlUSD), which then earn 16%

So it is in the project’s best interest to keep people from staking with attractive points programs and draw these out or replace them with other incentives. This is not unique to this project, but part of most other points earning stables as well (e.g. USDE, USR, …).

Risk considerations

The contracts are audited, the team doxxed and the backers reputable. The risk of a straight-up rug are considered quite minimal. That being said, as with every new protocol, especially those that integrate into many others, there are a additional inherent risks stemming from the protocol itself as well as every single integration. However lvlUSD is very transparent about these risks and even provides an explanation about the main factors:

• Collateral risk
• Lending protocol risk
• Opsec risk
• Smart contract risk
• Slashing risk

How does this maximize my Ethereal points?

Ethereal has a campaign to provide extra points for Pendle users (LP and YT) compared to simply holding eUSDE. Exploiting this by taking both sides of the same trade with YT eUSDE and PT eUSDE has been scrutinized and can result into points slashing.

However you can hedge yourself by using lvlUSD instead, a completely separate pool and protocol - and still earn an extra boost on top while getting some extra APR.

For this you buy the lvlUSD PT and put whatever you would earn until expiry into eUSDE YTs. As an example using $100k of capital: Base case:

• $100k eUSDE = 100k Ethereal points + 3,000k Ethena points 1.1*

Points maximizing with lvlUSD Pendle PT:

• $97,350 into lvlUSD Pendle PT Vault = ~$100k lvlUSD PT until 29 May
• $2,650 into eUSDE Pendle YT vault = 115k YT eUSDE = 115k (160% Ethereal points + 50 Ethena points) = *184k Ethereal points + 5,750k Ethena points
• On expiry: You get all the points plus a clean $100k in lvlUSD from your PT

So this strategy effectively almost doubles both your Ethereal and Ethena points, and furthermore if you refer yourself, you get an additional 10% bonus on the account that you referred with.

Exposes you to risk of lvlUSD and price fluctuations (could be positive or negative) until expiry due to the nature of Pendle YTs and PTs.