USDai's upward depeg is a fascinating case study into stablecoin mechanics, PT <> YT flows, and basic economic principles that underpin DeFi. WTF is intern waffling about? Let me break this SILLINESS down and how YOU could have capitalized. ___________________________________________________ Unlike MOST depegged stablecoins, USDai by @USDai_Official depegged in an UPWARD direction. What this means is that traders are currently willing to pay more than $1 for something that should be valued EXACTLY $1. Your first instinct is probably "what type of regard is buying $1 for more than $1" and I'd USUALLY be in agreeance. The difference is that holding USDai gives users Allo Points which are being 'priced in' to the standard $1/USDai value. "But wait... shouldn't every stablecoin with points also be valued > $1 then?" ___________________________________________________ To answer this question, we need to understand how stablecoins maintain peg in the first place. The most common method is using a Peg Stability Module (PSM) which allows users to arbitrage mispricings while returning the stablecoin to peg: 1. Price < $1 → users buy stablecoin and redeem for $1 of underlying (or something similar) 2. Price > $1 → users mint stablecoin and sell for > $1 We are in Scenario 2. for USDai but there is an issue - USDai caps are fully filled so arbitrageurs CANNOT mint more to return it to peg! The surge in demand for USDai's Allo Points WITHOUT the ability for new mints disrupts the stablecoin equilibrium. As a result, USDai SHOULD be expected to be ABOVE peg until caps are raised. ___________________________________________________ The next thing you may have noticed is USDai's Implied Yield running to an absolutely SILLY 51.6% fixed APY, by far one of the highest yielding stables on the platform. There is something CRITICAL to note here - Pendle prices assets in terms of the UNDERLYING token....