Ethereum’s Liquid Staking Derivatives (ETH) market is starting to turn heads as it gears up for a potential surge of growth that might add $24 billion to its total value within the next two years, as assessed by HashKey Capital. Through staking — a mechanism that allows crypto holders to earn a passive income without actually selling their digital assets, the LSD market of Ethereum successfully amassed a staggering total value locked (TVL) of more than $22 billion this year. Drawing from the numbers, the market capitalization of all active LSD projects has reached an astounding $18 billion landmark.
HashKey’s analysis further projects that between 31%-45% of the entire ether supply might be staked by the end of Q2 2025. This move is tremendously anticipated to beef up the value of the LSD market. The report succinctly presents the correlation between protocol revenue for LSD protocols and ETH prices, explaining that the liquid staking protocols are closely bound to ETH and stand potential to gain a stronger market share over staked ETH.
While the prediction of such potential surges present a good side of the picture, HashKey Capital has also thrown light on the plausible setbacks the trend might face. On the downside, an influx of investor participation could potentially lead to diminishing staking yields. However, the report reassures that any unwelcoming effects of this could be counteracted thanks to the versatility of the decentralized finance (DeFi) protocols.
The plasticity of the DeFi protocols allows staked assets to be used in yield farming, lending or other profitable DeFi strategies. Thus, it creates a layered structure for generating revenue and might cushion the blow of any predicted decreases in staking yields. The senior researcher of HashKey, Henrique Centieiro affirms that in the future, an astute actor would have all his or her ETH entirely staked in LSDs.
Source: Coindesk
