Massive withdrawals in the main Ethereum 2.0 staking pool

Lido price.

Lido, the largest Ethereum 2.0 staking pool, has seen a considerable reduction in its ether (ETH) deposits from 6.68 million ETH in early May to 4.32 million ETH today. This represents a drop of close to 35%.

According to shows the portal DeFiLlamainvestments in Ethereum 2.0 through Lido are currently at levels similar to those of February 2022.

Apparently, it would be a collateral consequence of the general fall in prices in the cryptocurrency market. It is possible that investors, seeing how their deposits depreciated, have withdrawn their funds to exchange them for stablecoins or fiat money.

To understand this, it is necessary to know that Lido is a liquid staking pool. In other pools, deposits will remain locked in the Ethereum 2.0 smart contract until after the merge (or merge). Instead, in Lido, the pool gives the investor the synthetic token stETH on behalf of the ETH deposited.

The stETH holders are the ones who will receive the staking rewards. And in stETH (which has 1:1 parity with ETH) can be withdrawn from the Lido pool at any time. This was what happened massively in recent days.

Lido price.
Lido marked an ATH (highest price in its history) in its TLV of ethers deposited in April of this year, with more than 7 million. Source: DeFi Calls.

The massive withdrawal of stETH on Lido started right on the date that terra USD (UST) lost its parity against the US dollar. This fact, as reported by CriptoNoticias, produced negative consequences for the price of various crypto assets, since —according to many investors— confidence in the entire industry was damaged.

See also  Red Lightning: this is what the new face of Bitcoin looks like in Latin America

How Lido’s TLV Drop Affects Ethereum 2.0

Lido is the largest staking pool on Ethereum 2.0. Such is its scope that accusations have arisen that Lido staking may end up being a “monopoly”, as detailed by this medium.

Lido competition.
The growth of Lido over its competitors is attributed to the liquidity that the stETH token possesses within decentralized finance. Source: Bi.Etherscan.io.

With 4.32 million ETH deposited in the Ethereum 2.0 smart contract (equivalent to USD 8.6 billion), Lido is a very important entity for this network. As seen in the chart above, more than 30% of all ETH staked was deposited through this pool.

It is worth clarifying that the withdrawal of investor deposits in Lido does not harm the pool or take away participation in the Ethereum staking.

As mentioned, what investors withdrew was the stETH token. The ETH, on the other hand, are deposited in the network contract and they will not be unlocked until the phase known as sharding is executed (which is planned for 2023).

Leave a Comment

Your email address will not be published.