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How Long Will the Ethereum LSD Narrative Last? Talking 2023 Trends with Nansen’s Martin Lee

Liquid staking tokens on Ethereum are booming. Lido, like Frax Shares, is up 150% in a month, but other protocols like Rocket Pool are catching up.

But that’s not all. NFTs have also seen heavy trading volumes for several weeks in a row and show few signs of slowing down.

The question is how long this positive trend will continue. Is it the bounce of a dead cat, or the beginning of a long-awaited recovery?

To help process numbers and interpret some of the on-chain data, Martin Lee – Data journalist at a popular cryptocurrency analysis firm Nansen.

Liquid staking coins are trending upwards, but for how long?

Ethereum LSD, or Liquid Staking Derivatives Coins, is the hottest topic of 2023 so far, with many protocols seeing significant increases in locked value and, in turn, growing in popularity.

For those unfamiliar with the concept, there is a comprehensive guide Ethereum liquid staking.

Instead of staking directly into the Beacon depositor contract, the LSD protocol allows users to stake ETH and receive a synthetic version of it (the new token itself). It can be used in various DeFi applications to trade, farm, and provide liquidity. Such.

In speaking on this issue, Lee outlined two main advantages. For example, Mr. h outlines that staking ETH directly into his smart contract is “not really capital efficient” for several reasons. First, the capital requirement is rather high (32 ETH) and the lockup period was previously unknown.

therefore:

A natural solution to this is liquid staking. He gets liquid tokens in exchange for what he staked (he is ETH in this case). For example, by staking ETH on Lido, you get fully liquid stETH that can be exchanged with various DeFi protocols.

Liquid staking solves both the problem of illiquidity of staked ETH and the high capital requirements to participate in ETH staking.

For example, native tokens for the LSD protocol, such as Lido’s LDO, have recently been around. LDO itself has climbed close to 150% in the past month, along with other protocols such as Rocket Pool.

The catalyst for this appears to have been the recent announcement that Ethereum’s Shanghai upgrade will roll out to a public testnet in February and mainnet in 2023. This is a pivotal moment for the Ethereum community as it will allow us to unlock 32 ETH owned by validators. Joined a beacon contract for the first time. The consensus seems to be that this will increase demand for liquid staking alternatives. This is the main reason for its current popularity and its increasing rating.

As for when stories inevitably die out, Lee says most such trends slow down to the date of the event that prompted their emergence in the first place, in this case the date of the Shanghai upgrade.

Trends usually die on the day of the event itself. For example, the ETH merge was such a big topic, but on the merge day itself, people stopped talking about it altogether.

NFT volume also pops

At the time of our record, NFT trading volume was through the roof, and despite some decline over the past few days, the market has shown a significant recovery.

In fact, by January 17th, the ETH NFT recorded up-only volume for five consecutive weeks.

Source: Nansen

On the issue, Lee said this is more or less consistent with what we have seen in past cycles.

Whenever very boring action with essentially no movement and very stable prices continues for a long period of time, NFTs tend to do their own mini-runs each time it happens.

Over the past few months, the general price action has been very stagnant. NFT then moved to its own mini-run, with some projects doing better than others.

Don’t hesitate to watch the full video above to find out what Lee thinks will trend this year and whether the Shanghai upgrade will cause a lot of selling pressure on ETH’s price.

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