3 Reasons Why Lido DAO Token Is About To Break The Downtrend

Ethereum (ETH) and decentralized finance (DeFi) are undergoing a seismic shift as 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 by scaling issues and high transaction costs.

Alongside this transition has been the introduction of liquid staking, which helps add DeFi usability and gives investors the ability to do more with their assets than just lock them up indefinitely. Liquid staking can also help investors build more capital-efficient portfolios.

One protocol that has benefited from the shift to liquid staking is Lido (LDO), a platform that allows investors to earn staking rewards on their tokens, while also allowing them to run the resulting LP tokens in various decentralized financial (DeFi ) protocols.

Data from Coin-Crypto Markets Pro and Trading Display shows that the price of LDO is up 28% from a low of $1.27 on Feb. 21 to a daily high of $1.64 on Feb. 22.

LDO/USDT 4-hour chart. Source: TradingView

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

LIDO adds KSM strike

The most recent development of 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 focuses on compatibility between Kusama and the Ethereum (ETH) network.

KSM holders who choose to wager on Lido can earn continuous strike rewards at an APR of 18%, while also using the wagered Kusama (stKSM) on various DeFi platforms to earn additional returns.

Other benefits include staking without the delay of bonding and un-bonding periods and the ability to maximize staking rewards through Lido’s dynamic reallocation to the most profitable KSM validator nodes.

TVL rises

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

Total value locked on Lido. Source: Defi Llama.

After peaking at $13.26 billion on December 26, 2021, the total value locked onto Lido fell to a low of $7.74 billion on January 31, as the market-wide sell-off reduced the value of tokens trading on the market. protocol were kept significantly reduced.

Since that time, the TVL has recovered to $10.97 billion despite the fact that the total market cap of the cryptocurrency market has remained flat. The addition of new assets such as KSM could be a reason for the rising TVL.

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 factor giving LDO a boost is the increasing popularity of liquid staking.

History of searches for liquid staking. 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 withdrawing them from circulation, or putting them to work in DeFi protocols through paired liquidity pools.

Liquid staking allows investors to take advantage of the best of both worlds by putting out tokens to secure the network, along with the ability to earn a return by pledging staked assets in DeFi as collateral.

For example, users betting Solana (SOL) on Lido can borrow their stSOL on Apricot Finance for an additional 32% APR. There is also a proposal vote on AAVE proposing to add stETH as collateral on 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 increases of the platform’s native LDO token.

Additionally, as the cryptocurrency ecosystem continues to embrace the transition to POS, 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 Coin-Crypto.com. Every investment and trading move involves risks, you should do your own research when making a decision.

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