- Lido DAO’s growth has stalled as the crypto winter continues.
- There is the challenge of higher money market fund returns.
- The US dollar is yielding over 5% as rates rise,
Lido DAO’s LDO token continued a downward trend this week as the mood in the crypto industry worsened. The token was trading at $1.60, where it has been stuck at in the past few days. This price is a few points above this month’s low of $1.40. It has dropped by more than 53% from its highest point this year.
The case for Lido
Lido is a major player in the cryptocurrency industry. It has grown to become the biggest DeFi network in the world with over $14 billion in total assets. This makes it bigger than Aave and MakerDAO, the second and third-biggest protocols in the world.
Lido offers a solution that is loved by thousands of people. Specifically, it provides liquid staking solutions that make it possible for crypto holders to make a return from their holdings.
Liquid staking is an essential part because it differs from the basic staking offered by the likes of Coinbase and Binance. Normally, staked Ether is fixed and cannot be used. Liquid staking solves this by making it possible for people to trade and offer their coins as collateral.
Lido is facing numerous challenges. For one, some of its staked pools like Kusama and Polkadot failed to attract enough traction, forcing it to end them. There are also concerns about the sustainability of staked Solana. In a statement, the company said that it will need more funds to maintain the program,
The biggest challenges are monetary policy and the performance of cryptocurrencies. For example, Ethereum has dropped by double-digits from its highest level this year. At the same time, the yield on staked Ether is lower than what the dollar is offering.
Liquid-staked ether has an APR of 3.6% while safe assets like dollar money markets are offering over 5%. Therefore, many people are shifting their funds to the US dollar.
The case for Lido and LDO
On the positive side, Lido, unlike either cryptocurrencies, has completed its token unlocks, meaning that there will be no dilution in the near future. Most tokens like ApeCoin, Sandbox, and dYdX have billions of unlocked tokens.
The other reason to invest in Lido is that it has a big market share in Ethereum’s liquid staking. It has over $14 billion in assets, giving it a market share of over 50%. This is a positive thing since it will continue generating returns for a long time. For example, data compiled by TokenTerminal shows that Lido is the third most profitable player in the crypto industry after Ethereum and Tron. It made over $300 million in the past three months.
Further, Lido could gain market share if the Securities and Exchange Commission (SEC) wins its lawsuits against Coinbase and Binance. The regulator argues that these companies are providing securities without following the law.
