Already up 150%, can this crypto continue to outperform Ethereum this year?
Ahead of the planned upgrade for Ethereum (ETH 6.75%) known as Shanghai this month, interest is growing around striking. Arguably one of the biggest benefits surrounding this wave of new interest in staking is Lido DAO (I DO 17.06%), which is up almost 150% this year. That surpasses the annual gains of Ethereum, which is up 28%.
However, for Lido DAO to continue to outperform Ethereum this year, two key issues need to be addressed.
Will the bet continue to grow in popularity?
In 2022, staking became a buzzword in the crypto industry, thanks in large part to Ethereum’s conversion from a proof-of-work blockchain to a proof-of-stake blockchain as part of The Merge.
For investors, the term “betting” became synonymous with “passive income,” because betting works much like depositing your capital into an interest-bearing account. You earn rewards on your crypto holdings for a predetermined period of time, during which time you cannot sell or withdraw the underlying crypto. People are willing to pay you these rewards because they need your crypto to validate new transactions on the blockchain. In November 2022, the staking value of Ethereum rose to $20 billion, making Ethereum the most popular platform for staking.
Based on the latest monthly data, staking continues to increase in 2023. Not all the money goes to Lido DAO, of course, but this upcoming crypto now represents almost 75% of the market for liquid staking, which is the most popular form of staking. In comparison, Coinbase Global controls around 15% of the market for liquid bets despite being the second largest cryptocurrency exchange in the world. It’s easy to see why investors are enthusiastic about Lido DAO: It’s the clear market leader, and it’s not even close.
Also, based on research from Coinbase, the market for Ethereum stakes is largely untapped. At the end of November, Coinbase calculated that only 12% of all Ethereum has been staked, which is a much lower figure than for comparable Layer 1 blockchains.
There’s a good reason for this: Ethereum was first converted to a proof-of-stake blockchain in September, so the opportunity for the average investor to stake Ethereum has really only been available for six months. Staking caught on so quickly because it was largely seen as a very easy way to earn as much as 5% on your Ethereum holdings. Some cryptocurrency exchanges offered even higher prices, hoping to attract new users. Likely, as more Ethereum is staked over time, Lido will continue to benefit from new stake inflows.
Finally, staking may get a new momentum from the Shanghai upgrade. With the upgrade, investors will be able to unstake their Ethereum for the first time, making the crypto much more attractive from a liquidity perspective. There will no longer be the worry that once you “lock” your Ethereum, you won’t be able to get it back. That could lead to a new wave of momentum for staking, which is already a popular form of passive income for crypto investors.
Will the SEC leave the Lido DAO alone?
The Securities and Exchange Commission (SEC) has signaled that it is ready to go after any cryptocurrency exchange – including the likes of Coinbase – if it offers betting products to customers. In February, the SEC fined crypto exchange Kraken $30 million for offering betting products to clients. The SEC argued that Kraken’s investment products were a form of unregistered securities. The Kraken has now stopped all efforts. For its part, Coinbase says it is ready to fight efforts to ban staking on its platform.
However, Lido DAO differs significantly from Coinbase and Kraken in that it is a decentralized staking platform, not a centralized staking platform. Lido DAO is not a cryptocurrency exchange, but a decentralized autonomous organization (DAO). This is essentially a new form of organization made possible by blockchain technology. There is no company or executive staff, and all transactions made by the organization take place on the blockchain. . In other words, Lido DAO does not force you to become a customer, create an account or keep your money on the Lido DAO platform. To use Lido DAO, you only need a digital crypto wallet that you control at all times.
The SEC may not like centralized efforts, but it has shown no inclination to go after decentralized efforts. Long story short: Lido DAO seems to be safe for now. But it’s worth noting that even speculation about a possible SEC investigation earlier this month was enough to send the Lido DAO down 10% in a single day.
Should you buy Lido DAO?
As more and more of the world’s Ethereum is staked, Lido DAO is going to become a better and better investment. While Ethereum is the most important part of the Lido DAO business model, there are also floating staking options on the Lido DAO for blockchains such as Solana, which currently ranks third among all blockchains in terms of total value locked via staking. As the popularity of staking increases, it will enable Lido DAO to become the staking platform of choice for other blockchains beyond just Ethereum.
Right now, the Lido DAO looks like a great investment opportunity, simply because stakes are at the very heart of what the new proof-of-stake Ethereum blockchain is all about. So don’t worry if you are not familiar with the name Lido DAO. As long as the Lido DAO remains the largest decentralized staking platform for Ethereum, it is a screaming buy.
