Investors Bet on Liquid Staking Tokens Amid Rumors of Centralized Staking Ban

By Tsunami 02/9/23 2:26 PM

The Liquid staking tokens saw a surge in value overnight as investors bet on growth in decentralized staking products amid rumors of their centralized counterparts facing a possible ban in the U.S.

According to CoinGecko data, the liquid staking sector jumped 5.4% on average, while the broader crypto market capitalization slid 3.4%. Tokens of market leader Lido jumped by over 10% before retreating on Thursday, while Rocket Pool’s RPL and Stader’s SD tokens rose 10% in the past 24 hours. Liquid staking refers to the exchange of staked ether for tokenized versions of Ether that can be used in decentralized finance (DeFi) applications.

The rumors of a possible ban on centralized staking products came from Coinbase CEO Brian Armstrong, who said that he had heard rumors that the U.S. Securities and Exchange Commission would like to ban retail investors from engaging in cryptocurrency staking.

According to a report from Staked, a non-custodial staking service provider, the value of staked assets was about $42 billion in the fourth quarter of 2022, with annualized staking rewards of $3 billion.

A ban on centralized staking providers in the US would be a boon for Lido. Coinbase sits at 11.5% vs Lido’s 25%.
We can assume nearly all cbETH is from US customers. Lido will receive the vast majority of unlocked cbETH. $LDO https://t.co/VmyamW8thL pic.twitter.com/OTWtMlAT1L

— housefire (@chipflare) February 8, 2023

Prominent traders on Crypto Twitter hypothesized the flow of these funds into DeFi alternatives such as Lido and Stader, which may explain the immediate price bump for related tokens. The rumors come ahead of next month’s highly anticipated Shanghai upgrade on Ethereum, which will allow investors to withdraw their ether staked on the Ethereum blockchain.