Liquid staking tokens, such as Lido Finance (LDO) and Rocket Pool (RPL), have defied the broader crypto market’s bearish trend, posting impressive weekly gains of 22.9% and 12.8% respectively. This comes even as Ethereum’s price dipped 1% over the last week, according to CoinGecko data.
Liquid staking allows users to deposit ETH into a protocol, which then transfers the assets to the Ethereum mainnet. This service is particularly appealing as it eliminates the need for a minimum deposit of 32 ETH, as is necessary for direct mainnet deposits. Users receive staked versions of ETH; for example, Lido’s derivative token is called stETH.
The success of these liquid staking projects can be attributed to the recent Shapella upgrade, a merge of the Shanghai and Capella upgrades. Launched in April, Shapella finally allowed stakers to withdraw their Ethereum from the mainnet. At that time, a staggering 19.27 million ETH were locked in staking contracts.
A month later, Ethereum staking has regained traction with approximately 19.3 million ETH staked. Although there was a brief drop of 3.1% immediately after the upgrade, liquid staking projects like Lido Finance and Rocket Pool have since emerged as the biggest beneficiaries.
These projects now hold a dominant 36% market share, superseding other staking methods such as direct staking or those offered through centralized exchanges like Coinbase. In fact, Coinbase’s staked ETH derivative, cbETH, has seen its share shrink from 16.4% to 14.5% since Shapella.
Data from a Dune dashboard by analyst owen05 reveals that Lido Finance remains at the forefront, with its staked ETH increasing by 9.87% in the last 30 days. Meanwhile, Stakewise and Frax Finance have also experienced substantial growth, registering increases of 38.73% and 3.71% in staked ETH, respectively, over this same period.
The past 24 hours have even witnessed gains of 3-6% for tokens backing other staking projects such as Frax Finance (FXS), StakeWise (SWISE), and ANKR.
However, despite these positive trends, it is important to consider the potential risks involved in liquid staking services. Factors such as regulatory scrutiny, technological vulnerabilities, and reliance on new and untested projects could cast a shadow over these promising developments. Users should be prudent in their engagement with this growing market sector and seek sound financial advice before diving in.
Source: Decrypt
