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There’s a new crypto narrative in town!
Liquid Staking Derivatives, or LSD, is a relatively new concept in the world of decentralized finance (DeFi). It allows investors to generate additional returns on their staked assets by using them as collateral in popular DeFi protocols. This trend has been gaining popularity in recent times, as evidenced by the impressive one-month gains achieved by protocols like Ankr, Frax Ether, and cbETH on the Defi Llama LSD TVL rankings.
One factor contributing to the popularity of LSD is the upcoming Shanghai upgrade on the Ethereum network. This upgrade, which will allow investors to stake their Ethereum and earn rewards, is expected to lead to an increase in liquidity hunting as investors look to use their newly unstaked Ethereum in LSDs.
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With the tentative date for the Shanghai upgrade set for March 2023, many are anticipating “The Great LSD War” as liquidity hunters seek to support their staked assets and potentially revive their portfolio. It is likely that stakers will gravitate towards DEXs with deep liquidity, such as Curve and Balancer, in order to generate the best returns.
There are a few potential scenarios that could occur following the Shanghai upgrade on the Ethereum network. One possibility is that there could be increased sell pressure from OG whales or those looking to part ways with their assets. Another option is that stakers may continue as usual, with no change in their behavior.
A third potential scenario is that investors may move their freshly unstaked Ethereum to LSDs, or Liquid Staking Derivatives, in order to benefit from better returns and DeFi functionality. This could lead to a battle for liquidity among larger DEXs, such as Curve and Balancer, as they will want to offer deep liquidity in order to attract investors. It’s worth noting that protocols like Aura and Convex may play a significant role in liquidity provision and incentives. This scenario is particularly interesting because it could result in increased competition among DEXs and potentially lead to new innovations and developments in the space.
It’s worth considering your options for gaining exposure to the LSD narrative. Tokens like LDO, RPL, and SWISE are worth keeping an eye on, as they have seen significant growth recently. CoinGecko has even created a new section for liquid staking governance tokens, with LDO and SWISE as the standout performers this week.
It is also important to pay attention to the narrative surrounding Liquid Staking Derivatives, as it could potentially have significant impacts on the market. It is advisable to carefully consider your options and approach, as well as to be aware of the potential for fluctuation in the coming year. When it comes to Ethereum, it may be wise to consider buying upon hearing rumors and selling before any major announcements. It is always important to do your own research and exercise caution in your decisions.
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