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Lido DAO (LDO) revealed the effect of running a low-float coin initially. While the project grew, the value of LDO was stuck in a range.
Lido DAO is growing by all possible metrics, except for its token price. Traders noticed that LDO was stagnant, though reporting a much higher overall market capitalization. Lido DAO is a case study in low-float coins, which have a different price cycle compared to previously launched fully diluted assets.
The inflow of new LDO tokens started in 2021, combining several linear unlocks. Lido DAO released tokens from investors and founders over the course of a year. The venture round tokens and validator rewards were also unlocked in 2021.
As of 2024, more than 90% of the supply is in circulation, and no cliff unlocks are expected. Despite this, LDO had a flat price performance, not reflecting the growth of users or fees.
Since the observation, LDO still managed to break out, trading at $2.05. The token’s history reveals the effect of unlocks, which coincided with the price slide from highs of $6.25.
3 years ago, in July 2021, $LDO price was $1.85 and had a market cap of $40 million.
Today, $LDO price is $1.85 and has a market cap of $1.7 billion.
How? Magic fundamentals. pic.twitter.com/7Ra5ff4GzB
— Res (@resdegen) July 17, 2024
Lido DAO’s path may show the future of other liquid staking projects
The trajectory of LDO now raises questions about other ETH staking projects like EtherFi or Ethena. Not all unlocks are bearish, depending on market conditions. But those projects may be affected by their low float and potential selling pressure. In the case of Ethena (ENA), the market has absorbed only 1.7B tokens, out of a total supply of 15B.
ENA is still at the beginning of its unlock schedule, with around 9% of tokens available. In two days, another 14.89M ENA will be unlocked, currently valued at $6.89M. Token unlocks continue to happen for leading tokens like Solana (SOL) and Arbitrum (ARB), in a market where liquidity is allocated more carefully.
In the case of low-float tokens, some traders choose shorting strategies to benefit from the selling pressure. At the same time, LDO, like other low-float tokens, has performed sharp short-term rallies.
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Over time, however, LidoDAO received a boost from becoming the go-to staking protocol. As of July, the protocol holds 29.1% of all staked ETH. The protocol now holds more than 9.7M ETH, one of the biggest stakes in the Beacon chain contract. The protocol drew in 299,666 unique stakers so far, though growth has slowed down in the past months.
The current behavior of former low FDV tokens may give hints for the path of projects like Eigen Layer. Largely set aside for now, EIGEN tokens will start unlocking at the end of September. But that token may signal the end of the low FDV approach.
Too many projects weighed down the market, and the communities noticed the path to value extraction for VC buyers. In 2024, the tide turned to tokens that aim to enrich the community and have no overhang of locked tokens for years.
LidoDAO almost completed token unlocks
LidoDAO had five total funding rounds, loading the token’s balance sheet with generous allocations. Investors gained direct access to only 22.2% of the tokens, though the 36% treasury may be redistributed over time.
The significant stakes built during the early financing rounds have not only created LDO whales. The entities owning the tokens also have a disproportionate weight in voting, based on the size of their LDO stake.
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Even with the current token dilution, more than 75% of the token’s supply is held by the top 50 wallets. The entire LDO holding community consists of about 45K wallets. Overall, LidoDAO manages to produce $150K in daily earnings based on fees, on top of locking up $33B in value, based on Ethereum (ETH) tokens.
In the past three months, LidoDAO achieved earnings between $2.3M to $4.5M per month, with variation based on market conditions. The high fees happen during a period of low actual engagement, with a few hundred active daily users.
The protocol still leads among liquid staking projects, but the issue of token dilution puts LDO in the category of ‘VC tokens’. Those projects used the native enthusiasm of crypto retail while extracting value for the early investors.
Cryptopolitan reporting by Hristina Vasileva