Liquid staking: Any prospects with $LDO?

20 янв. 2023 г.

This is a continuation of our previous idea:
In the first part, we dissected native staking, the current situation, and made a firm prediction about what Ethereum will face next. In this article, we will define liquid staking, examine current data and the most important liquid staking protocol, Lido, and forecast what's next for the LDO native token.

What is liquid staking?
Liquid staking is a method of staking in which the user receives derivative tokens from the provider protocol, such as stETH from the Lido protocol, which can be used to generate additional revenue through DeFi protocols or converted to any other token via CEX or DEX.

What is LDO?
Today, there are 9 most popular liquid staking protocols that account for ~40% of the total market. Lido is the most popular protocol (~28.9% of total staking volume and 87.5% of liquid staking volume).
LDO is a governance token. It does not entitle holders to a share of the generated yield or commissions. The token also has additional inflation. Lido constantly cooperates with different projects and provides incentive awards for pools with its tokens. 2-3 million LDO per month. But the number of allocated rewards is gradually decreasing.

Smart-money in LDO
We should also mention the smart money that invested in LDO tokens in the early stages. In short, all of the major funds that invested in LDO are still holding their tokens, and many have not sold them at all. Paradigm, for example, increased the capitalization of its investment from $50 million to $130 million.

The only exceptions were Alameda Research and 3AC, which had serious issues in 2022 and required funds for liquidity and closing payment gaps.

WHAT SHOULD WE DO WITH LDO?

• The capitalization of all liquid-staking protocols will increase because their product offer alleviates users' pains and makes them more agile. LDO is the locomotive of this trend; compare it to Ethereum in the Layer 1 segment. While LDO may appear to some to be outdated, there are protocols that provide better and more flexible terms to their users. However, betting on the growth of LDO is betting on the growth of the entire segment. If you want to make a lot of money, you should look for protocols that are less well-known by the general public.
  

• Smart money believes in LDOs, but you must understand that their margin of safety is greater than that of a single trader. Always assume that your investments will be long-term.
  

• Users trust Lido because their ecosystem has been tested in the market, their derivative token stETH has been attacked by other market participants, and the Lido team knows how to deal with it.
  

To summarize, a long in LDO is a bet that the liquid staking protocol segment will expand further, and you choose the market-tested protocol among others.
By the way, you can trade LDO with us. Check the signature. Write your comments abut LDO and don't forget about risk management!