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Lido’s Market Share Shrinks as stETH Struggles with Depegging
In a recent report by Tom Wan, head of data at Entropy Advisors, Lido’s market share has taken a significant hit, dropping to a three-year low in the Ethereum staking market. This decline coincides with the prolonged depegging of stETH, the liquid staking token issued by Lido.
According to the data provided, Lido’s staked ETH volume has plummeted by 5% over the past six months, marking its lowest share since March 2022. Meanwhile, the platform’s withdrawal queue has reached an all-time high, with more than 235,000 stETH waiting in line for exit.
The downturn in Lido’s market position is closely tied to the struggles of stETH with depegging. As revealed by Glassnode analytics, rising WETH borrow rates on Aave have made popular leveraged staking strategies unprofitable, causing users to unwind their positions and increase sell pressure on ETH, weakening the stETH/ETH peg.
In addition, a growing validator exit queue has further exacerbated the situation, rendering arbitrage less efficient and slowing the recovery of the peg. Mark Zeller, co-founder of Aavechan, pointed out that repeated large ETH movements, particularly from whales such as Justin Sun, have fueled up Aave’s utilization rates, making borrowing prohibitively expensive and accelerating the unraveling of leveraged positions.
While Lido remains the largest Ethereum staking provider by a significant margin, holding over 9 million ETH, its nearest competitors, Binance and Coinbase, lag far behind. Despite this, Lido continues to offer an annual percentage rate (APR) of 2.8% and boasts more than $33 billion in total value locked.
It is worth noting that stETH has been grappling with depegging issues for some time now, which may be partly attributed to rising WETH borrow rates on Aave.
Source: cryptoslate.com
