Ethereum Liquid Staking tokens are skyrocketing. Lido is up 150% in a month, as is Frax Shares, while other protocols, like Rocket Pool, are also catching up.
But that’s not all. NFTs are also experiencing massive volumes for several weeks in a row, showing little sign of slowing down.
The question now is how long this positive trend will last: is it a catastrophic rebound or the start of a long-awaited recovery?
Liquid Staking Coins Are Trending Up, But For How Long?
Ethereum LSD, or liquid staking derivative coins, has been the hottest story of 2023 so far, with many protocols seeing considerable growth in locked value and, by extension, popularity.
For those unfamiliar with the concept, we have a complete guide on Ethereum Liquid Staking.
Rather than staking directly on the Beacon depositor contract, LSD protocols allow users to stake their ETH and receive a synthetic version of it – a new token in itself – which can then be used in various DeFi applications to trade, mine and provide liquidity. , And so on.
Speaking on the matter, Lee highlighted two major benefits that he believes are part of why the narrative has become so strong. For example, ha pointed out that staking ETH directly into the smart contract is “really capital inefficient” for several reasons. Firstly, the capital required is quite considerable (32 ETH) and the lock-up period was previously unknown.
The natural solution to this problem would be liquid staking. You get a liquid token in exchange for whatever you staked (in this case, ETH). For example, if you stake ETH with Lido, you get stETH, which is fully liquid and you can interact with various DeFi protocols.
Liquid staking solves both the illiquidity issues of staked ETH and the high capital requirements to participate in ETH staking.
Tokens native to LSD protocols, such as the Lido LDO, have been released recently. LDO itself has grown by almost 150% over the past month, following the example of other such protocols like Rocket Pool and others.
The catalyst for this appears to have been the recent announcement that Ethereum’s Shanghai upgrade will hit the public testnet in February and the mainnet in 2023. This is a pivotal moment for the Ethereum community as this will allow validators to unlock the 32 ETH they have. participated in the Beacon contract for the first time. The consensus seems to be that this would increase demand for liquid staking alternatives, which is the main reason for their current popularity and increasing valuations.
As for when the narrative will inevitably die out, Lee says that most trends like this usually slow down around the date of the event that caused their emergence in the first place – in this case, the modernization of Shanghai.
Typically, the trend dies out on the date of the event itself. For example, the ETH merger was such a big topic, but on the date of the merger itself, people completely stopped talking about it.
NFT volumes also appear
At the time of our recording, NFT trading volume was exploding, and while there was some decline over the past few days, the market has seen a considerable rebound.
In fact, on January 17, ETH NFTs saw five straight weeks of only increasing volumes.
Commenting on the issue, Lee said this is more or less consistent with what we have seen in past cycles.
Whenever we have long periods of very boring action, where there is virtually no movement, prices are extremely stable, NFTs tend to go on their own mini-run every time this happens .
Over the last 2-3 months, price developments across the board have been extremely stagnant. Then NFTs sort of launched their own mini-run, with some projects doing better than others.
To find out what Lee thinks this year’s trends will look like, as well as whether or not the Shanghai upgrade will lead to heavy selling pressure on the price of ETH, feel free to watch the full video below above.