Liquid staking tokens surged overnight as investors speculated on the growth of decentralized staking products. This comes amid rumors of a possible ban on centralized staking products in the U.S. CoinGecko data shows that the liquid staking sector rose 5.4% on average, while the broader crypto market capitalization dropped 3.4%. Market leader Lido’s token jumped 9%, while Rocket Pool’s RPL and Stader’s SD tokens rose 10% in the past 24 hours. Investors are betting on the growth of decentralized staking products as they offer more security and control over funds compared to their centralized counterparts.
Coinbase CEO Brian Armstrong recently tweeted that he heard rumors that the U.S. Securities and Exchange Commission (SEC) may be looking to ban retail investors from engaging in cryptocurrency staking. Liquid staking is the exchange of staked ether for tokenized versions of ether that can be used in decentralized finance (DeFi) applications. These tokens can be used as collateral for loans, margin trading, and to earn yield. If the SEC does decide to ban retail investors from staking, it could have a significant impact on the DeFi space and the crypto industry as a whole.
In the fourth quarter of 2022, the value of staked assets was estimated to be around $42 billion, with annualized staking rewards of $3 billion. This figure was not limited to retail investors, and prominent traders on Crypto Twitter hypothesized that the funds may be flowing into DeFi alternatives such as Lido and Stader, which could explain the immediate price bump for related tokens. Staked, a non-custodial staking service provider, released a report on the matter, and it is likely that the DeFi sector will continue to benefit from the influx of funds from staking.
The rumors of a potential ban on centralized staking providers in the US has been a boon for Lido, a decentralized staking provider. Coinbase, a centralized staking provider, currently sits at 11.5% of the market share, while Lido has 25%. If the ban is implemented, it is expected that Lido will receive the majority of the unlocked cbETH, as nearly all cbETH is from US customers. This comes ahead of next month’s highly anticipated Shanghai upgrade on Ethereum, which will allow investors to withdraw their ether staked on the Ethereum blockchain. The upgrade will provide investors with more freedom and flexibility when it comes to their investments, and could potentially lead to an increase in the use of decentralized staking providers like Lido.
