3 Reasons Why Lido DAO Token Could Be About To Break Its Downtrend

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Ethereum (ETH) and decentralized finance (DeFi) are undergoing a seismic shift with the transition to Eth2 and a proof-of-stake consensus mechanism is helping to increase the value proposition for the network which has historically been plagued with staking issues. at scale and at high levels. transaction costs.

Along with this transition came the introduction of liquid staking, which helps add utility to DeFi and gives investors the ability to do more with their assets than just lock them indefinitely. Liquid staking could also help investors build more capital-efficient portfolios.

One protocol that has benefited from the transition to liquid staking. .

Data from Cointelegraph Markets Pro and TradingView shows that the price of LDO rose 28% from a low of $1.27 on February 21 to a daily high of $1.64 on February 22.

LDO/USDT 4 hour chart. Source: Trading View

Three reasons for the price reversal for LDO include the launch of Kusama Staking (KSM) support, an increase in the total value locked to the protocol, and the growing popularity of liquid staking in the cryptocurrency market.

LIDO adds KSM staking

The most recent development to come to the Lido platform was the addition of support for Kusama liquid staking.

This integration was made possible through a development partnership with the Moonriver Network, a protocol that emphasizes compatibility between Kusama and the Ethereum (ETH) network.

KSM holders who choose to stake on Lido will be able to continuously earn staking rewards at an 18% APR while also being able to use staked Kusama (stKSM) on various DeFi platforms to earn additional returns.

Other benefits include staking without the delay of bond and release periods and the ability to maximize staking rewards through dynamic Lido reassignment to the most profitable KSM validating nodes.

TVL flies away

A second metric to note is the total value locked on the platform. Lido’s current TVL stands at $10.97 billion according to data from Defi Llama.

Total value locked on Lido. Source: Llama Challenge.

After peaking at $13.26 billion on Dec. 26, 2021, the total value locked on Lido fell to a low of $7.74 billion on Jan. 31 as the market-wide selloff drastically reduced the value of the tokens held on the protocol.

Since then, the TVL has risen to $10.97 billion, despite the fact that the total market capitalization of the cryptocurrency market has remained stable. The addition of new assets like KSM could be a reason for TVL’s rise.

Lido also supports Ether, Terra (LUNA), and Solana (SOL).

Related: pSTAKE Finance brings liquid staking and a new airdrop to the Cosmos ecosystem

Liquid staking makes interacting with DeFi more pragmatic

Another contributing factor to give new momentum to LDO is the growing popularity of liquid staking.

Liquid staking search history. Source: Google Trends

Prior to the addition of liquid staking, token holders had to choose between earning rewards through single staking on the network and taking them out of circulation, or putting them to work in DeFi protocols via paired liquidity pools.

With liquid staking, investors can get the best of both worlds by staking tokens to help secure the network as well as the opportunity to earn a return in DeFi by pledging staked assets as collateral.

For example, users who stake Solana (SOL) on Lido can also lend their stSOL on Apricot Finance for an additional 32% APR. There is also a proposal vote on AAVE that suggests adding stETH as collateral to the AAVE v2 marketplace.

If Lido continues to add multi-chain assets for staking and liquid staking, it could open the door for further price appreciation for the platform’s native LDO token.

Additionally, as the cryptocurrency ecosystem continues to embrace the transition to point-of-sale, liquid staking is likely to grow in popularity, which could also lead to future gains for LDO.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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