Defying the Markets: This Crypto Play is Hitting Record Highs

Crypto Staking Hits Record Highs despite Digital Assets Sell Off

It’s not all doom and gloom in the cryptocurrency sector. While digital assets led by Bitcoin and Ethereum have been under immense pressure amid a prolonged market selloff, another segment of the broader sector has flourished. Liquid staking is the segment that is flying high, having turned out to be a hotbed of investments in recent months.

Liquid Staking Demand

Staking is one of the options offered by various platforms that allow token holders to lock their tokens to help secure the blockchain network and enhance liquidity. It turned out to be an attractive investment play, given the rewards up for grabs on locking tokens in liquidity pools for a specified amount of time.

The value of assets locked in liquid staking services has jumped by more than 290% to over $20 billion over the past 12 months. Lido platform has benefited with the value of assets locked in the platform soaring to $14 billion, helping support the 60% rally of the network’s native token. The increase signals investors are increasingly locking their digital assets in staking services instead of trying to buy and sell to benefit from price differences.

Consequently, liquid staking has emerged as one of the flourishing segments in decentralized finance. The segment allows people to trade, lend, and borrow without intermediaries but through blockchain-powered pools. Its popularity has grown on being embraced by Ethereum, one of the most important blockchains, following an upgrading of the network last year.

Likewise, the Ethereum network offers Ether token holders an opportunity to earn an equivalent of 4% annually on locking their tokens to help secure and enhance liquidity. The number of Ether token holders that pledge tokens to help approve Ethereum transactions has risen by more than 40%, affirming strong interest in staking.   Rival blockchains like Solana and Cardano also offer staking opportunities.

Crypto Market Sell Off

Liquid staking pools like Lido and Rocket Pool have since bounced back after last year’s sell-off following the TerraUSD stablecoin implosion. The collapse of the stablecoin, followed by the FTX scandal, triggered a massive sell-off in the broader industry, triggering a $2 trillion crypto market rout.

A rebound in liquid staking comes against global regulators’ pressure on cryptos and staking products from various centralized exchanges. Kraken and Bitstamp are some of the popular staking platforms that have been targeted and pushed to discontinue their products. Hong Kong is one of the jurisdictions that have taken a stringent stance against staking, with Singapore banning all forms of staking.

The broader cryptocurrency sector has struggled to bounce back from last year’s slow down amid reduced demand for risk in the markets. Bitcoin, the flagship cryptocurrency, has so far struggled to power and find support above the $30,000 handle signaling waning demand for digital assets. Ethereum has also struggled to rise past the $2,000 level.

Likewise, the prices of major digital assets remain far below the record highs of 2021 and 2022 as investors turn their attention to other assets. Equities have emerged as a preferred investment vehicle in addition to staking for digital assets. Investors have been ramping up positions in equities depicted by the Nasdaq 100, rallying by more than 30% year to date, with the S&P 500 also up by more than 15%.

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