ETH’s largest derivative stETH showed an uptrend rise, while Ethereum investors also took a sigh of relief after Ethereum’s upgrade or as we know the ‘the Merge’ happened smoothly.
Lido’s staked ETH surged post the Ethereum Merge
The price of Lido’s staked Ether showed an uptick from 0.97 to 0.99 ETH on Thursday according to CoinMarketCap’s data. The token has recovered from a sharp fall of 0.95 to 0.99 which seems like a win-win for the investors.
Lido Finance – the most prominent Ethereum liquidity staking provider allows investors to lock their ETH to earn staked Ethereum stETH as rewards. Investors can earn rewards on their staked Ethereum but they cannot unstake their holdings until the Shanghai upgrade is done. The tentative date of the upgrade is not disclosed yet.
Crypto traders have closely monitored the price of ETH and staked ETH (stETH) to determine the potential risks associated with investing in ETH and staking the asset for rewards.
Caption: ETH’s price on September 15, 2022
Caption: StETH’s price on September 15, 2022
“The successful completion of the Merge has alleviated the immediate risk that came with holding liquid staking tokens, causing a near instant recovery in prices,” Clara Medalie, research director at crypto market research firm Kaiko, told CoinDesk.
Additonal Read: Lido DAO Price Prediction
StETH traded at parity with ETH before it was de-pegged during the LUNA crash which caused the crypto market crash and led to a liquidity crisis.
The risk aversion was quite evident with the imbalance in the exchange pool of Protocol Curve which is the main platform to swap staked Ether. Months before the Ethereum Merge, the pool’s representation of 75% of StETH and 25% of ETH gives a clear understanding of the fear index topping for ETH investors.
The imbalance in the pool and the value of staked Ether caused an economic downturn for investors trading in bulk. The disparity caused firms like Celsius and Three Arrows Capital as they were unable to sell their derivative holdings.
With the Merge completed successfully, the platform saw a change in numbers. The pool’s balance has become better with StETH having a 65% stand and ETH standing at 35%. This ratio has not been recorded since June, 2022.
“Traders and liquidity providers quickly re-entered secondary liquid staking markets following the Merge, although it will be about six months before stakers can retrieve their staked ETH,” Kaiko’s Medalie said.
Post the successful completion of Merge, Lido Finance tweeted that the staking yield on ETH is increased.
Lido’s ETH staking yield has increased from 3.8% to 4.0% relative to pre-merge, based on rewards collected in the last 6 hours.
It’s estimated to be around 4.8-5% tomorrow.
— Lido (@LidoFinance) September 15, 2022
Lido DAO Ether deposits surge 160% in 2022
According to data from Glassnode, the staking service platform Lido Finance deposited ETH worth 4.14 million into the Ethereum 2.0 smart contracts for its users. Lido DAO token was trading at an all time low in the beginning of the year while staked Ethereum too was being retested multiple times.
The Before and After Effects of Ethereum Merge
The dominance ratio of Bitcoin and Ethereum also saw a slight change.
Recently, DeFi protocols saw a huge traffic of ETH borrowers just before the Merge. The borrowing demand spiked because of an expected Ethereum fork. This means that the Ethereum blockchain would split in two and the ETH holders would get an airdropped token of the new Ethereum chain.
Source: CoinDesk, Cointelegraph