Influence of Total Value Locked on the Yield Dynamics of Liquid Restaking Tokens

This paper investigates the relationship between Total Value Locked and the yield dynamics of liquid restaking tokens. Using data from the Pendle protocol, we explore how liquidity levels relate to implied yields. We find economically and statistically significant disparities in yield distributions across TVL quantiles. Our results demonstrate that lower TVL pools consistently offer higher yields, reflecting elevated risk premiums demanded by investors. Investors can leverage these systematic yield differentials for arbitrage strategies. Long-term cointegration analysis suggests a stable TVL–yield equilibrium despite no clear short-run causality.