Every Friday, we cover a project making waves in the DeFi space.

We provide timely coverage of what they’re doing, why it’s important, and how you can benefit.

Make sure to read to the end to see the action(s) we took based on today’s content!

(If you’re reading via email, our Action To Take is likely below the cutoff point, so make sure to read online).

Want daily DeFi insights? Join our Telegram group!

We believe that no newsletter should simply be talking at people. We want to foster productive discussions and have an ongoing relationship with each subscriber. The Telegram exists for exactly that reason.

As its name suggests, Pear Protocol brings pair trading to DeFi. 

But what is pair trading? How is it different from traditional long and short positions?

For context, whenever anyone places a trade, they’re inherently going long one asset and short another. However, this typically involves going long or short a volatile asset against a “stable” one, such as USD. 

But in pair trading, both assets in the trade are typically volatile. 

Most perps DEXs are built to handle the former – going long or short a volatile asset against a fiat currency such as USD. And while you can technically take separate long and short positions on perps DEXs to emulate a pair trade, Pear is very unique in its design. 

The chart below shows the many ways that Pear stands out from the rest. After all, while you can create pair trades on existing platforms, those platforms aren’t optimized for pair trades. However, Pear Protocol: 

No longer do you need access to prop desks, prime brokers, or hedge funds to manage sophisticated trading strategies. Pear Protocol opens up the massive pair trading market – which professionals use to manage hundreds of billions of dollars in institutional capital – to everyone.

Pear also exemplifies the utility of onchain composability – by inheriting the liquidity of Hyperliquid, DeFi’s top DEX in terms of volume and fees, this platform ensures that traders benefit from capital efficient trade execution and position management.

To-date, Pear has generated over $1.53B in volume, and 2026 is on track to be its best year yet. The $257M generated by Pear in Q1 puts it on course to break $1B annual volume in 2026 for the first time.

For more information on pair trading, the Pear team has also created a detailed educational resource, as well as a full Udemy course, which can be of use to skilled and novice traders alike.

Now that we know what Pear does, let’s dive into why it’s relevant for this specific time in DeFi’s development.

Over the past year, the proliferation of yield-generating strategies in DeFi has accelerated significantly. In other words, there’s demand for organic yield, and the primary way it’s being generated is through market-neutral strategies.

Ethena is typically credited with bringing this strategy to the “mainstream.” In 2024, they launched USDe, which can be staked to earn passive market-neutral yield via funding rate arbitrage.

The launch of USDe created a “boom” in yield-bearing stablecoins (or “yieldcoins”), many of which run on similar models and yield-generating methods. However, as market conditions have shown, the yield provided by funding rate arbitrage loses its premium during periods of low market activity. As a result, many yieldcoins have seen falling APYs over the past 6-9 months. 

Now, the search for alternative forms of yield is heating up. Pear Protocol offers a powerful alternative with pairs trading, which can generate yield by simultaneously longing and shorting one or many assets. 

For example, in directional markets (bull or bear), you could simply long the strongest and short the weakest risk-on assets. In a sideways market, there may be opportunities to “go long” mean reversion by shorting the outperformers and longing the underperformers. These strategies generally remain uncorrelated to the market, focusing instead on how assets perform against one another – with up to 100x leverage.

Pear’s integration of HIP-3 assets highlights another one of DeFi’s core advantages over traditional markets: programmability. 

HIP-3 enables anyone to permissionlessly create a new market within the Hyperliquid ecosystem, and it’s been a massive driver of onchain exposure to offchain assets. In fact, HIP-3 assets have generated over $215B in volume in just over 5 months!

As we covered here, HIP-3 has gained significant traction as infrastructure that powers onchain exposure to traditional market classes. Unlike traditional brokerage accounts, HIP-3 allows anyone to trade commodities, stocks, forex, and more from a single account – with no approvals or requirements involved.

This is especially beneficial for Pear Protocol because it opens up countless new opportunities to capitalize on arbitrage between assets.

Frequently, temporary correlations emerge between asset classes. For example, BTC has gone through long stretches of being correlated with oil, the Nasdaq 100, and most recently, software stocks. Pear enables easy access to all of these assets, and is built to support the exact form of trading that most efficiently enables trading the continuation or divergence of these trends.

To be a successful pair trader over time, it’s crucial to understand the complex relationship between the assets you’re trading. Basic due diligence when evaluating a pair trade’s prospects includes knowing key metrics like correlation, cointegration, beta, and more. 

That’s where Agent Pear comes in.

You can think of Agent Pear as your own personal pair trading assistant. It uses real-time market data to help traders track the quality of complex multi-asset relationships.

In its current form, Agent Pear has two main features.

The first is a tool that you can use directly within the trade entry screen, which calculates relevant statistics between the selected assets, as shown below: 

A major benefit of agents in DeFi is that they’re monitoring markets for opportunities 24/7. This advantage powers Agent Pear’s second primary tool, which is a continuously-updated list of live pair trade opportunities. 

Pair trading can be extremely complex, but this feature makes it easy to spot opportunities and time your entries on high-quality setups. This can be found by clicking the “Agent Pear” tab at the top of the website.

But are Agent Pear’s signals worth following? See for yourself!

If you click “See Metrics” on the top right of the Agent Pear screen, you can see Agent Pear’s performance over time – and not only is he consistently profitable, but he trades a lot!

The combination of quality (29% APY) and quantity (6,178 trades) speaks to the power of agentic trading.

Consistent with Pear's strong focus on accessibility, they've also built an extremely useful Telegram bot, where Agent Pear offers direct assistance to users. And the best part is, there's no code required – you can simply ask it questions as if you were talking to a professional trader. 

It can answer any and all questions you have about the markets – from asset-specific chart analysis, to real-time pair trade setups, to which narratives are trending, and much more.

For example, you can simply ask "what looks like a good short against BTC right now?" 

And within a matter of seconds, it'll reply with detailed analysis on which assets are currently setting up to be good short opportunities (against BTC), the stats to back up its recommendation (e.g. correlation, cointegration, etc.), as well as a target price and stop loss recommendation for each. 

Here’s an example of Agent Pear in action:

Ultimately, the bot transforms the due diligence process from the traditional setting of high-pressure boiler rooms to convenient and simple conversations on your phone – just like texting a friend.

Finally, if you’re wondering, “can Agent Pear trade my funds directly,” we have good news!

The next phase of Agent Pear is currently in development, and will feature a public vault that anyone can use. Once you deposit, Agent Pear will allocate your capital to the opportunities he finds around the clock – and since the funds don’t leave your custody, you’ll be able to withdraw anytime.

While most of the positions we’ve taken in the Machines & Money Portfolio so far have focused on generating yield, today we’re adding a more speculative position using Pear Protocol.

Throughout April, we covered the BTC rally setup based on its monthly chart pattern. This is a long-term pattern that’s only developed a few times over BTC’s short history. However, it’s preceded major rallies, including a 15x move and 83x move, over the following 1-3 year periods.

Using pair trading, we can take advantage of BTC’s upside from a different angle: by shorting another asset alongside it – in this case, the S&P 500. This has several benefits to plain BTC trading:

As you can see in this chart, the BTC/SP500 ratio appears to be breaking out after being stuck in a 2-month, 10% range. This range was preceded by a period of significant S&P 500 outperformance, during which the relative value of BTC fell by more than 50%. 

Now, the ratio appears to be breaking out of the range, which could signal a period of significant BTC outperformance.

In this trade, we’re betting on BTC to outperform the S&P 500, which brings some advantages to simply going long BTC. 

For example, since the BTC/SP500 ratio has been trading in this range, it naturally enables a tight stop loss, which allows us to take on greater leverage. 

And since both assets are “risk-on,” in a broad risk-off move across asset classes, the gains from the SP500 short position would likely cushion the losses from the BTC long position.

Overall, the thesis behind the trade is not necessarily that the correlation will end, but that BTC will simply outperform the S&P 500. If both go up, we expect BTC to go up more, and if both go down, we expect SP500 to go down more.

So, here’s our trade: 

Setting up and executing this trade was extremely easy – here’s what we did.

First, choose your trade parameters – assets, weights, size, and leverage.

Once you’ve filled everything out, simply click “Approve Builder Fee.” Once that’s done, you’ll need to submit the transaction – and that’s it! 

After your transaction executes, you can view your trade details – including assets, value, entry and mark prices, margin, leverage, PnL, net funding fees, and TP/SL levels – in “Open Positions” at the bottom of your screen.

As DeFi continues to mature, Pear Protocol will undoubtedly benefit from the increasing interest in sophisticated trading strategies such as pair trading. We’re excited to watch this growth continue to unfold, as well as use Pear (and soon, Agent Pear as well) for our own trading!