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Why did Lido DAO(LDO) Price rallied nearly 400% since July?

Lido DAO

Key Takeaways:

What is Lido DAO (LDO)?

Launched back in December 2020, Lido is a liquid staking solution for proof-of-stake blockchains, and works on aggregating node operator partners who run the underlying validator infrastructure on Ethereum, Solana, Terra and Polkadot blockchains. It was launched with the launch of Ethereum’s proof-of-stake based Beacon Chain first entered Phase 0 and only allowed users to stake on Ethereum 2.0 in multiples of 32 ETH.

Lido is practically a way of staking the ETH you’re holding to the ETH 2.0 deposit contract, while at the same time giving holders with less than 32 ETH to stake too. Lido basically provides liquidity by issuing stETH in exchange for users depositing ETH, allowing them to earn staking rewards on Ethereum 2.0 while maintaining liquidity and reducing the 32 ETH requirement to any amount.

The LDO crypto token, is a ERC-20 governance token compliant with the Ethereum network. LDO is also used to reward DAO users and activities. Other uses of LDO include grants, referral program payouts, liquidity incentives, insurance purchases and bug bounties.

But, why is Lido DAO (LDO) token rising?

Lido provides liquidity facilities to a number of blockchain networks, as mentioned earlier but what must be noted is that its primary staking function still comes in the form of staking to the ETH 2.0 deposit contract. And as such, according to data from DefiLlama, out of Lido DAO’s total-value-locked (TVL) of $6.82 billion, $6.69 billion is staked on the Ethereum network itself.

Thus it is, so far primarily catering to those holders who wish to stake their ETH holdings to the Ethereum 2.0 deposit contract ahead of the Ethereum Merge but don’t have 32 ETH to stake in the traditional route. Through Lido DAO, they are able to stake whatever fraction they have and earn according rewards after the eventual Ethereum Merge that is expected to happen tentatively between 10-20 September, 2022.

And hence, with the highly anticipated Ethereum Merge strongly on the way, investors are expecting to see ramping up of staking efforts, especially from the retail side, smaller players who can’t afford 32 ETHs but still want to participate in the Merge.

Lido DAO (LDO): A Technical Overview

LDO/USD | Source: Tradingview

Ever since the beginning of July, 2022 – exactly two months ago – LDO price was trading just shy of $0.5 but now its trading well over $2, which represents an over 4x jump in a two month period (marked in blue). While at its highs in the middle of August, LDO price had breached $3 briefly – that represented a near 7x jump in a month and a half period (marked in grey). Even after the crash over the past two weeks, LDO price has managed to record one of the swiftest recoveries since the beginning of this week, scaling over 30% since 29 August.

And with this recent jump, it has managed to breach over the 50 day moving average too, which can be expected to bring about some more buying pressure from the bulls in the market and as the Ethereum Merge draws nearer. More and more ETH holders want to be a part of the validating community and earn rewards and Lido DAO gives them the opportunity to earn those rewards in proportion to their holdings, fair and square.

The next logical level of resistance for the token would be its local high of $3, which it can easily break if the overall market sentiment improves. LDO is quickly becoming a very optimistic looking recovery candidate going forward.

Lido DAO (LDO): On-chain Analysis

Total number of addresses on the rise

Number of Addresses | Source: Glassnode

From this chart it is quite clear that LDO price has seen a depreciation in value since last year, even before the bull run in the crypto market that happened between October and November 2021. But despite that, according to data from Glassnode, the number of addresses on the chain have been increasing constantly (marked in blue). A closer look at the chart reveals that especially since July, the number of addresses on the chain has seen a sharp spike upwards.

This coincides with the observations made above, when the price of the LDO token also began recovering very rapidly. This was around the time the crucial Sepolia Testnet Merge happened, back on 6 July, 2022. That event had sort of solidified the oncoming of the highly anticipated Ethereum Merge, that will transition the Ethereum Network from a proof-of-work consensus mechanism to a proof-of-stake one.

Lido is also has the Largest-Value-Stacked to ETH2 deposit contract

ETH 2.0 Total Value Stacked by Provider | Source: Glassnode

Lido DAO has an upper edge in the space because it has remained the leading Ethereum staking service provider since August 2021. As of end of July, it had had put 4.14 million ETH in the Merge’s official deposit contract Eth2 via its staking contracts. As is evident from the chart above, the red region signifies the dominant position that Lido holds over other players in the ETH 2.0 staking space.

Future of Lido DAO (LDO) token

The future of Lido DAO (LDO) token seems pretty much sorted out. With the Ethereum Merge firmly on the way and the slow explosion of the DeFi industry as a whole would be a boon for this crypto. Staking is a way to earn an income on your crypto holdings without needing to sell it. Thus, this would be a very attractive proposition for long term holders who wish to earn some passive income from their crypto holdings.

Lido DAO (LDO) Price Prediction

LDO price is well slated to give healthy returns on the long term. It has a full potential to reach well above the $2.25-2.5 mark by the end of September and even touch $3.5 by the end of the year 2022.

To read more: Lido DAO Price Prediction

Lido DAO (LDO) Price Forecast

Year LDO Price Forecast
2022 $3.3 to $3.5
2023 $4.7 to $5
2024 $6.8 to $7.5
2025 $10 to $10.4

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Prices as of 1st September, 2022

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