I hope you are all having an excellent day, welcome to CryptoGod-1's blog on all things crypto. Two big bits of information have been revealed recently concerning the protocol Lido, which allows users to stake their ETH for stETH. Here I will be looking at the good, and bad, news associated with the protocol.
Good News?
Grayscale, the digital asset management firm, have added Lido liquid staking protocol’s governance token to its DeFi fund. The firm made the announcement that it had sold off some of its existing Fund Components in proportion to their respective weightings, and made use of the cash to purchase Lido (LDO). The staking platforms native token now makes up 19.04% of Grayscales DeFi fund. They still have Uniswap's native token (UNI) as their number one assets as part of their DeFi Fund, holding 45.46% in the token. Other assets within their fund include:
Aave (AAVE) at 11.53%
MakerDAO (MKR) at 10.82%
Curve DAO Token (CRV) at 7.03%
Synthetix (SNX) at 6.12%.
The move means Grayscale are now eligible to vote on the protocol’s governance proposals. The asset management firm could now potentially influence Lido’s future by shaping policies that are more favourable to them. For example, back in June the Lido protocol voted in favour of increasing rewards for its largest stakers, and there is the potential of more votes similar to this going through if Grayscale see benefits to them.
Bad News?
Chinese crypto entrepreneur and Tron founder, Justin Sun, has recently withdrawn 30,000 stETH off the staking platform Lido. Worth approximately $55.8 million, the massive withdrawal took place via two transactions on Saturday the 8th of July 2023. Both wallets are known to belong to the billionaire, although the controversial crypto entrepreneur has so far not commented publicly on it.
Several crypto enthusiasts on Twitter were quick to flag the withdrawals, although they were also quick to point out that although he has withdrawn a massive amount, Justin Sun remains the biggest holder of staked ETH, with approximately 260,000 stETH ($484 million) remaining.
Outlook and Market Impact
Lido has become massively popular since Ethereum's shift into a PoS mechanism, meaning the liquid staking solution for PoS crypto's is becoming the preferred way to stake ETH. From retail to institutional investors, they are making the most of receiving a substitute token in exchange for ETH or any other crypto they choose to lock up in a staking pool. As of the 8th of July 2023, over 10 million ETH was staked via a liquid staking pool, with Lido accounting for almost 80% of this amount. The staked token of Lido, stETH, is currently the seventh largest cryptocurrency with a market cap over $14.2 billion.
The large redemption from Justin Sun has not appeared to cause any impact with the market prices, as stETH’s market price remained relative to ETH and both tokens continue to track each other closely. It was testament that stETH continued to trade in a normal way, as those in the community who noticed the initial withdrawals by Sun concluded that his substantial size in the market was likely why. While ETH did see a drop in price over the weekend, it is unknown if it was in anyway related to Sun's dumping of staked ETH tokens. The price fell from around $1,870 at the opening of the day to $1,865 at the end of the day, around 0.3% of a decline, but quite normal for a day of trading in crypto. By Monday the asset began to rise once again, pushing towards the $1,900 mark.
However the news is taken, it is certainly a mixed bag for Lido. One the one hand it is positive that Grayscale have invested more into their native token, but the negative impacts of the asset manager having more voter rights could cause problems down the line. At the same time seeing Justin Sun remove so much stETH from the protocol is never a nice sign, but while he retains so much more in place then, for now at least, Lido is still benefitting from his investment.
Have a great day.
CryptoGod-1.
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