Lido Finance Market Share Drops to Lowest Since 2022 Amidst Staking Volatility

Lido Finance, the previously dominant Ethereum staking platform, has seen its share of the segment fall to 25%. This is the lowest figure since March 2022, noted Tom Wang of Entropy Advisors. In February, the value was 32%, in March – already 29.6%. In total, over the last six months, Lido’s share has fallen by 5%, the expert added. The top three are centralized exchanges Binance and Coinbase, with 8.3% and 6.9% respectively. At the same time, 19% of the direction is occupied by unidentified validators. Regarding the latter, Wang noted that these could be both individual stakers and fairly large organizations that do not disclose data about their wallets for some reason. On July 16, the total volume of deposits in staking reached a record ~36.5 million ETH, after which it dropped to 36.1 million ETH at the time of writing. Lido was the leader in net outflow over the past month. The queue of validators to exit has grown sharply in a week from 1,920 to over 475,000, with the wait time increasing to nine days. Galaxy Digital Research attributed the jump in part to the increased requirements introduced by the Pectra update. However, experts said the main factor was the cascading reduction in leverage in LST-assets. “This volatility was driven by a sharp reduction in ETH supply on Aave, initiated by large withdrawals from the platform by a wallet tagged to the HTX exchange. The wallet withdrew more than 167,000 ETH beginning June 18,” the analysts explained. WETH loan rates on Aave have risen from 2% to 18% in a week, making popular leveraged ‘cyclical’ staking strategies unprofitable. In so-called looping, users use LST or LRT-assets to borrow ETH on platforms like Aave and convert the funds back to increase staking income. As a result of the rate hike, investors began to close positions, which led to the loss of the peg to ETH of Lido’s stETH token, Glassnode noted. Aavechan co-founder Mark Zeller confirmed that the situation was affected by large withdrawals from Aave. This led to a spike in the leverage ratio on the lending platform. However, he estimates that the situation is stabilizing and borrowing rates have almost returned to normal.

Source: Coinpaper