Ethereum Liquid Staking tokens explode. Lido is up 150% in a month, as is Frax Shares, while other protocols, such as Rocket Pool, are also catching up.
But that’s not all. NFTs are also seeing massive volumes for several consecutive weeks, showing few signs of slowing down.
The question now is how long this positive trend will continue – is it a dead cat bounce or the start of a long-awaited recovery?
To help us calculate the numbers and interpret some of the string data is Martin Lee – a data reporter from the well-known cryptocurrency analysis company Nansen.
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 tremendous growth in locked value and, by extension, popularity.
For those unfamiliar with the concept, we have a complete guide to Ethereum liquid staking.
Instead of staking directly in 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, operate, provide liquidity, and so on.
Speaking on this, Lee pointed to 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 in the smart contract is “really capital inefficient” because of several things. First, the capital requirement is quite considerable (32 ETH) and the lockup period was unknown.
The natural solution to this 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 requirement to participate in ETH staking.
Native tokens of LSD protocols, such as Lido’s LDO, for example, have been on the loose lately. The LDO itself has grown nearly 150% in the past month, similar to 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 it will allow validators to unlock the 32 ETH they staked in the Beacon contract for the first time. The consensus seems to be that this would increase the demand for liquid staking alternatives, which is the main reason for their current popularity and rising valuations.
On when the narrative will inevitably die out, Lee says most trends like this typically slow down on the date of the event that caused them to emerge in the first place – in this case, the Shanghai upgrade. .
As a rule, the trend is extinguished 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 has been some decline over the past two days, the market has seen a considerable rebound.
In fact, as of January 17, ETH NFTs have seen five consecutive weeks of only up volumes.
Commenting on the question, Lee said this is more or less in line with what we’ve seen in previous cycles.
Whenever we have long stretches of very boring action, where there is hardly any movement, prices are extremely stable, NFTs tend to do their own mini run whenever this happens.
Over the past 2-3 months, price action across the board has been extremely stagnant. Then NFTs sort of kicked off 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 cause heavy selling pressure on the price of ETH, feel free to watch the full video below. above.
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