Lido DAO has lost its share of staked ETH, but still considers itself a key protocol for institutions.
The recent Ethereum (ETH) rally turned into a withdrawal rush for Lido DAO and a price slide for wrapped stETH. The protocol saw a peak level of unprocessed withdrawals, while wstETH fell from its recent highs.
The recent Ethereum (ETH) rally was favorable for some DeFi protocols. In the case of Lido DAO, the ETH rally caused a drive to withdraw the tokens from liquid staking. The spike in withdrawals arrived after ETH rallied above $3,800 for the first time in months. Later, ETH sank to $3,692.72 as the overall market rally paused for consolidation.
A total of 228,992 ETH is waiting to be unstaked, with an average waiting time of 71 hours. Both whale and retail batches of ETH have been trying to leave Lido at the highest rate for the past two years. One reason may be the presence of ETH locked at a lower price, attempting to free up assets and realize profits.
Recently, the value locked in Lido expanded above $34B, based on the notional ETH valuation. The protocol offers 2.8% in annualized passive income, in addition to issuing the stETH and Wrapped stETH tokens for additional DeFi activities.
Wrapped stETH slides from the recent peak
As the use cases for regular ETH shift, Wrapped stETH has slid from its recent peak. The token habitually traded at a premium to ETH, recently peaking above $4,600.
In the past day, WSTETH retained its downward trend, losing 2.4% to $4,446.47. The recent slide also happened on record trading volumes.
WSTETH is mostly swapped against stETH and regular ETH, using Uniswap decentralized pairs. Even through DEX, the token achieves over $148M in daily volumes, expanding activity to a three-month peak.
The WSTETH premium means traders can acquire more ETH due to appreciation, or swap to stETH and then unstake it through the smart contract. WSTETH makes up 1.28% of locked ETH reserves, and the exodus may not hurt the ecosystem at scale. However, the turning of the trend may signal a shift in general Ethereum use cases.
Lido dominance in ETH staking slides lower
In the past two years, Lido’s staking dominance has fallen from over 75% of staked ETH to around 62.8%.
The biggest challenge came from Binance staking, which expanded its share from under 3% to over 20% since 2023.
At the same time, Lido is confident its stETH may be used by institutions for both ETF passive income and as a way to put ETH treasuries to work.
Lido has slowed down in the past year, though the protocol still generates robust revenues per user and remains a part of the basic DeFi infrastructure. Recently, Lido added BitGo as its first US-based custodian to offer staking infrastructure.
Similar unstaking events have happened before, though the protocol retained its influence while continuing to build its roadmap. In the coming months, Lido V3 is seen as a potential staking mechanism for the inflow of institutions into ETH. Overall, 30% of ETH remains locked in the Beacon Chain contract, and unstaking remains rare even for older whales.
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