Regulatory easing + buybacks initiated, is Lido finally starting to return to value?

Original | Odaily Daily Report

Author｜Azuma

The leading player in the liquid staking sector, Lido (LDO), has finally strengthened recently. According to OKX market data, as of August 11, 10:00 Beijing time, LDO is priced at 1.52 USDT, with a 24-hour increase of 14.21%, and a staggering 64.5% increase over the past week.

As the largest liquid staking protocol in the Ethereum ecosystem, Lido has long dominated the total value locked (TVL) rankings in the Ethereum ecosystem and even the entire on-chain ecosystem. Although it has recently been surpassed by Aave, which is experiencing rapid growth due to the borrowing of USDe-based assets, Lido remains one of the protocols with the most influence in the entire Ethereum ecosystem.

The recent rise in LDO can generally be attributed to both macro and micro factors.

Macroeconomics: Regulatory clarity on attributes, progress of staking ETFs

First, at the macro level, on August 6, the U.S. Securities and Exchange Commission officially released a statement on liquid staking activities titled "Statement on Certain Liquid Staking Activities," which clearly states that "liquid staking activities" related to protocol staking do not involve the issuance and sale of securities, unless the deposited crypto assets are part of or bound by an investment contract. Participants in liquid staking activities are not required to register their transactions with the U.S. Securities and Exchange Commission under the Securities Act, nor do they need to comply with the registration exemption provisions of the Securities Act regarding these liquid staking activities.

In June 2024, when the SEC was still led by Gary Gensler, it charged liquidity staking projects like Lido and Rocket Pool with being securities. On that day, LDO was affected by this negative news, dropping over 10%, and continued to be in a downturn for a long period afterward. However, just one year later, the new SEC's statement clarified that their business model does not involve securities attributes, effectively loosening the regulatory constraints for the subsequent operation and development of such projects.

In addition to the regulatory shift, another key development regarding the staking sector is that BlackRock has submitted an application to the SEC to introduce a staking mechanism in its spot Ethereum ETF. Although this application is still under review, it is expected to be approved without too much difficulty given the SEC's stance. The market generally anticipates that with the approval of staking ETFs, Lido, which currently accounts for nearly 25% of the Ethereum staking share, is expected to receive a certain boost in business and capital chasing.

Microscope: LDO buyback plan has finally been put on the table.

Compared to the indirect effects at the macro level, recent discussions about the LDO buyback plan may be the direct factor influencing the price trend of the coin in the short term.

On August 7, Kuzmich, a member of the Lido community, submitted a draft on the "LDO Buyback Plan" to the governance forum. The draft mentioned that the Lido treasury currently holds liquidity assets worth $145 million (17 million USDC, 11.9 million USDT, 1.22 million DAI, 28,640 stETH), but these assets are not generating income for the protocol.

The draft suggests that Lido should dynamically execute LDO buybacks based on treasury balance to improve the utilization model of protocol funds, boost LDO prices, and restore market confidence in LDO's value. Specifically, the draft recommends that under the current treasury reserve scale, 70% of liquid assets be used for regular LDO buybacks, while 30% be retained in the treasury for operational and strategic needs; when the treasury's liquid assets fall between 50 million to 85 million USD, the ratio will be adjusted to 50% buyback / 50% retention; when the treasury's liquid assets fall below 50 million USD, the ratio will be adjusted to 0% buyback / 100% retention (buybacks will be suspended until the threshold is restored).

According to the plan of the Lido governance forum, if everything goes smoothly, the draft will collect community feedback on the forum from August 7 to 14; it will then be discussed during the Lido token holders' conference call on August 14; afterwards, the proposal will be revised based on the feedback from August 15 to 24; and finally, it will be submitted for voting on Snapshot on August 25.

Although there are certain opposing voices within the community forum, most users' points of doubt are focused on the specific details of the plan, except for a small number of community members who insist that "buybacks are just a short-term game." For example, it is unclear whether the tokens will be destroyed after the buyback, and the methods of initiating and executing the buyback are still not clear enough, among other issues.

Considering that the current draft is still in its early stages, it is expected that further details will be modified after discussions in a conference call. Additionally, the recent strong upward movement in LDO prices is rare, leading to an optimistic expectation that this draft or other buyback plans derived from discussions around this draft will gain a certain level of community support.

ETH is "Prince", is it finally time for value discovery?

As one of the recognized ETH series Beta, LDO's performance over a long period of time can be said to be quite unsatisfactory.

The AAVE borrowing and repurchase momentum has rapidly surged above $300; the ENA borrowing business flywheel and treasury plan have skyrocketed (see "Up nearly 50% in a week, will ENA be ETH's biggest Beta?"); while PENDLE has opened up new imaginative spaces with Boros (see "Funding rates finally become tradable assets, how Pendle's sub-platform Boros disrupts the arbitrage market?"), LDO has remained in a relatively weak state for a long time, even though the expectation of a "staking ETF" has been called out for a long time, it has not been able to drive LDO's price performance over a relatively long period.

Under the dual stimulation of the current macro and micro environment, LDO finally shows some signs of a trend reversal. Could this be the beginning of price discovery for this ETH "prince"? It is still too early to make a judgment, but there is some hope.