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Analysts' Insights

Analysts' Insights

Matrixport on BIT - Weekly Round-up

- by Markus Thielen

Liquid Staking is the fastest TVL category

This crypto bull market is broadening out beyond ‘Bitcoin being a new pillar in TradFi investment portfolios’. The downtrend in Bitcoin’s dominance reveals that DeFi is making a comeback (see our notes from the last two weeks) – despite being an underperformer for most of 2023. Total Value Locked (TVL) has increased over the last 4-6 weeks, with ‘Liquid Staking’ driving the use cases.

The week around October 16-24 was key for DeFi’s reawakening: what happened?

A false tweet from a crypto news website on October 16 claimed that the SEC had approved BlackRock’s Bitcoin spot ETF. Subsequent news items reminded investors that a US-listed Bitcoin ETF was likely and potentially imminent. The Deposit Corporation listed BlackRock’s Bitcoin ETF, a judge ordered the SEC to re-review Grayscale’s ETF bid. This altered the crypto market with Bitcoin rallying +40%.

Lido TVL back to pre-UST depeg at $20bn

Since October 20, Lido’s TVL has increased from $13.9bn to $19.4bn (+39.5%) in just 1 month. The fragmentation of the DeFi market has favored liquid staking protocols this year, as we expected, and wrote in our January 6, 2023 report. Back then, only 14% of ETH was stacked vs. 23.2% today, and while Lido had a TVL of $6.14bn, today TVL is back to the 2022 high of $20bn. Our analysis pointed out that the average Layer 1 staking ratio was 58%.

Lido DAO token accrues value through the 5% staking rewards – steady wins the race

While the LDO-USD token rallied above $3.0 and finished on a monthly basis at $2.7, the price dropped back to $1.7 despite revenues becoming ‘predictably’ stable with a potential upward trajectory if the trend in staking continues – as we expect with 22% of Ethereum being staked vs. 58% of Layer 1 (based on our January 2023 analysis). This stable revenue could set a floor under the LDO-USD token at $1.7 with the upside being the all-time high with TVL reclaiming this level.

Lido’s token could be undervalued – a large breakout looms

While TVL increased by +228% for Lido this year, the LDO-USD token has only increased by +80% - underperforming Bitcoin, which is up +125%. As LDO is breaking out of a large triangle formation and with the amount of ETH being staked continues to increase, Lido itself should continue to be key beneficiary of the trend in staking.

Written by Markus Thielen, Head of Research & Strategy at Matrixport. Author of Crypto Titans.

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