While Bitcoin (BTC) and Ethereum (ETH) prices are currently barely moving, the costs of liquid-staking tokens are picking up. Here are the reasons. Governance tokens from DeFi projects in the liquid staking space for Ethereum are currently seeing substantial price gains. LDO from Lido Finance has gained over 40% in the past seven days, reaching a new two-month high at $1.37. The SWISE token from liquid staking provider StakeWise rose by over 70% in one week.
In comparison, Rocket Pool’s RPL token gained 16.43 percent and FXS from Frax Protocol, which recently started offering liquid staking for ETH, gained almost 14 percent.
Liquid staking platforms like Lido (LDO) or Rocket Pool (RPL) allow users to stake Ethereum without worrying about the necessary hardware, staking lock periods, 32 ETH or maintaining their staking nodes themselves. Investors need to deposit their Ether on the DeFi platforms staking on their behalf, retain a small portion of the rewards, and provide a so-called Liquid Staking Token. This staking token provides them a 1:1 claim on their staked tokens and automatically generates staking rewards.
The significant advantage for investors with Liquid Staking Tokens is that they do not need 32 Ether and can stake any amount of ETH. Your Liquid Staking ETH automatically generates staking rewards and can be sold at any time on some centralized crypto exchanges or decentralized exchanges.
Moreover, they can be used for DeFi applications to earn further interest and – once withdrawals for staked Ether are unlocked – exchanged for the underlying Ether. The latter, in particular, is a big plus for many investors. Many want the flexibility to sell their staked ETH at any time.
The double-digit price growth in liquid-staking projects is likely the anticipation of the first major Ethereum upgrade since the merge. The upgrade, known as Shanghai, will enable the withdrawal of Ether.
According to staking analytics platform Staking Rewards, Ether has a 14 percent staking rate, the lowest among all significant intelligent contract platforms.
Twitter user “The DeFi Investor” suspects that more investors are staking ETH due to the upgrade, as they no longer have to remain locked into the ETH staking contract indefinitely.”
He estimates that more people may use Liquid Staking ETH due to the upgrade to use their staked ETH to maximize returns in the DeFi space. Since more staked ETH on protocols such as Lido or StakeWise will also increase revenue for these protocols, he believes that the tokens of these protocols will directly benefit from the upgrade.