A look at the top performers over the past 24 hours reveals a trend that could trigger a boom in certain altcoins in 2023. We’re talking about Lido Finance (LDO), up 7% in the last 24 hours and up 17% over the last seven days, making it the 37th largest cryptocurrency after market capitalization.
Lido Finance is a decentralized liquid staking application that allows users to earn additional income for staking their assets. The application currently offers support for five cryptocurrencies: Ethereum (ETH), Polygon (MATIC), Solana (SOL), Kusama (KSM) and Polka dot (DOT).
Of particular interest, however, is the former altcoin, Ethereum. Like Thor Hartvigsen, Blockchain– and Defi researchers, explained, Liquid Staking Derivatives (LSD) altcoins could see a boom in 2023 as the second largest cryptocurrency by market cap implements the Shanghai upgrade.
Of all the major Layer 1 blockchains, Ethereum has the lowest deployment rate of just 14%. In contrast, 90% of all BNB are 72% of all ADA, 68% of all SOL and 62% of all AVAX staked. The huge gap is likely related to the fact that ETH is yet to be staked. The hard planned for March fork from Shanghai will change that.
While the analyst anticipates major unstaking initially, the upgrade could spark massive growth for liquid staking solutions over the long term. And Lido Finance (LDO) is currently the undisputed leader in ETH liquid staking, providing further rocket fuel for the LDO token.
Growth of leading liquid staking derivatives
Altcoins poised to skyrocket based on narrative
However, not only the LDO, but rather small LSD altcoins could benefit from the new narrative. As anonymous analyst “Karl” says, numerous LSD solutions are poised to shake the Lido Finance throne. Currently, LDO’s market share is about 65.62%, followed by Rocket Pool (3.10%), StakeWise (0.9%), Ankr (0.81%), Frax Finance (0.67%) and Stafi ( 0.25%).
LSD tokens and their market share. Source: Twitter
As the analyst estimates, altcoins Stakewise (SWISE) and Stafi (FIS) still have market caps below $20 million despite controlling a significant market share. “[T]However, heir tokenomics are not the best as there is still a significant chunk of supply to be unlocked as team/investor allocation and liquidity drain rewards,” the analyst added.
A look at the market share/market cap ratio also shows that both SWISE and FIS tokens are closely behind the leader and poised for future gains.
Market Share/Market Cap of LSD Tokens. Source: Twitter
Also of note is Frax Finance, which recently entered the LSD altcoin landscape and has already managed to capture a significant market share. Hartvigsen explained that Frax managed to attract more than 45,000 ETH (about $55 million TVL) in less than 2 months.
According to the analyst, there is “no sign of slowing down” as APRs are steady at 9-10%, far outperforming any competitor. Frax Finance achieves this by giving frxETH to users when they need either liquidity on Curve (frxETH/ETH) or stocked on Frax Finance (sfrxETH).
“Only sfrxETH receives the ETH staking return. This results in a higher APR as not all ETH wagered will receive the rewards as they are in the curve pool instead,” the analyst explained.
But Rocket Pool is also a prime candidate to grow out of the new narrative because of its relative size, recent growth in popularity, and several differentiators, Hartvigsen added.
Two potential spoilers for LDO
In the short term, however, there could be two spoilers for the price of Lido Finance token LDO in particular. Both Nansen and Chain EDGE’s on-chain data show that “smart money” was selling LDO rather than buying it, Twitter user @AvaxGems pointed out.
I guess not all of us are optimistic about LSD coins. Both @nansen_ai and @ChainEDGE_io (by @OnChainWizard) show that “smart money” sold $LDO instead of buying it. pic.twitter.com/9k0nt0tHpG
— rektGEMS🔺 (@AvaxGems) January 3, 2023
A second factor for LDO could be Alameda. Sam Bankman-Fried’s ex-company sold 719,498 LDOs worth about $717,451 for 601 ETH on December 28 and currently has 1.86 million LDOs left, equivalent to about $1.81 million.
Featured image by Nasa/Unsplash, charts by Messari, Twitter, TradingView.com
Source: Crypto News Deutsch