Liquid staking is a segment that has emerged as a phoenix from the ashes as the broader crypto market is in a prolonged recession.
According to a recent Bloomberg report, assets pegged to liquidity staking services surged 292% to reach $20 billion. This resurgence positions liquidity staking as a new star in the decentralized finance (DeFi) space, even as traditional DeFi services such as major tokens and loans continue to struggle.
Liquid staking, part of the cryptocurrency sector, is nearing all-time highs after a long digital asset slump https://t.co/DA1LABcpd6
— Bloomberg Crypto (@crypto) September 5, 2023
After assets peaked at $21 billion in April 2022, liquid staking has been hit hard. Elements like the TerraUSD stablecoin collapse And the $2 trillion plunge in the broader cryptocurrency market in June 2022 has hit the sector hard. However, liquid staking protocols like Lido and Rocket Pool are making a strong comeback.
Liquid staking has proven to be resilient, even as the majority of DeFi services have languished well below their 2021 and 2022 highs. Steve Berryman, chief business officer of staking service provider Attestant, noted that the number of Ethereum validators surged nearly 40% following a major network enhancement in April.
Network Upgrade and Validator Proliferation
One of the big tailwinds for the liquidity staking market has been Ethereum’s adoption of this form of staking through various network upgrades. ethereum validatoris responsible for locking up Ether (ETH) tokens to facilitate transactions on the network, with an annual yield of approximately 4% on additional tokens. The trend has prompted rival blockchains such as Solana and Cardano to also offer staking rewards, further boosting the momentum of the sector.
The adoption of liquid staking has made it easier for smaller investors to participate. Direct staking typically requires complex hardware and software, as well as large amounts of capital. Liquid staking platforms have streamlined this process, allowing investors to pledge small amounts of funds while also offering a tradable version of the staked coin.
Regulatory hurdles and an international perspective
The resurgence of liquid staking comes amid heightened regulatory scrutiny, especially in the United States, where centralized exchanges face crackdowns on staking products.
Such regulatory pressure has caused platforms such as Kraken and Bitstamp to stop offering these services. Asian financial hubs such as Hong Kong and Singapore have expressed similar concerns.
Despite these hurdles, Lido has now established itself as the largest DeFi platform with $14 billion in locked assets, and its native token has surged 60% this year.
Kunal Goel, a research analyst at Messari, likened the liquidity staking service to the “on-chain equivalent of government bonds,” noting that it had a low risk profile and no major hacks or exploits to date. are doing.
Additionally, HashKey Capital, a leading Asian cryptocurrency fund, recently report This highlights the amazing growth of the market and the potential impact of decentralized validator technology (DVT) on the liquid staking derivatives (LSD) sector.
what lies ahead
Cosmos Hub is considering a proposal for a major software upgrade aimed at making Liquid staking safer across the network. As markets continue to evolve, investors should be aware of alarming trends. Yields could fall as more people embark on liquid staking, according to a Husky Capital report.
In summary, the rise of liquid staking is a silver lining in a murky cryptocurrency environment. While major tokens and other DeFi applications struggle to regain their former glory, Liquid Staking has not only survived but thrived, cementing itself as a dominant force in the DeFi space.
struggle for power
Ethereum and Bitcoin are struggling to regain their past momentum.ethereum trading place $1,633.28 Real-time data from CoinMarketCap puts the market cap at nearly $196 billion. Despite a modest gain of 0.04% over the past 24 hours to this writing, it remains well below its historical highs, reinforcing the view that the market is still searching for direction. there is
Bitcoin, the market leader, does not paint a bright picture either. at the transaction price of $25,764.71 And its actual market cap is over $501 billion, down 0.50% at the time of writing.
The slump in these flagship cryptocurrencies highlights the turbulent conditions that continue to plague digital asset markets.
Ethereum’s lackluster growth despite major technology upgrades and a surge in liquid staking shows that recovery remains an uphill battle.
Likewise, Bitcoin’s halving in less than a day further underscores that the cryptocurrency market is still far from entering a new phase of trust and growth. These numbers put even more focus on the resurgence of liquid staking and show how remarkable that recovery is amidst the broader market downturn.