In a significant market development, Grayscale DeFi Fund has expanded its portfolio by incorporating the Lido DAO (LDO) token. Including the new asset marks Grayscale’s affirmation of Lido’s growth trajectory and its evolving role in the DeFi landscape.
The Power of Liquid Staking: A Strategic Investment Move
Liquid staking represents a cutting-edge approach in the world of crypto staking. This method enables owners of Proof of Stake (PoS) tokens to obtain a substitute token, as proof of their staked crypto held within a staking pool. Following the transformation of the Ethereum ecosystem post-Shappella, liquid staking has garnered popularity, primarily in staking ETH.
Lido, the protocol facilitating this form of staking, has risen to prominence amidst the Ethereum upgrade and subsequent surge in staking. Today, it enjoys such popularity that Lido staked Ether (stETH) holds the seventh position among cryptocurrencies by market capitalization, surpassing big names such as Cardano (ADA), Litecoin (LTC), and Solana (Sol).
Lido has emerged victorious from the dense forest of contemporary DeFi entities, boasting a higher value of locked assets than well-known DeFi tokens like UNI and CAKE, and even the DeFi stablecoin Dai. This development represents a testament to the growing user trust and market confidence in Lido’s staking protocol.
Grayscale’s Shift of Assets into Lido
Currently managing approximately $3.1 million in assets, Grayscale’s DeFi fund underwent a reallocation following Lido’s inclusion. LDO tokens now constitute over 19% of its asset basket, resulting from the firm strategically divesting some of its existing DeFi holdings. However, it’s essential to note that this move didn’t lead to any asset’s removal from Grayscale’s portfolio.
The choice to introduce LDO into its portfolio, when previously absent, underscores Grayscale’s significant faith in the DeFi protocol. The LDO token is second in holdings only to Uniswap’s UNI token, which forms over 45% of Grayscale’s total portfolio.
This substantial acquisition of LDO tokens allows Grayscale to participate in Lido’s governance proposals. Such involvement could enhance Grayscale’s influence within the DeFi ecosystem, further shaping Lido DAO’s direction.
Potential Staking Opportunity for Grayscale
While Grayscale hasn’t made any official announcements, its recent LDO acquisition may lay the foundation for staking its existing assets. Indeed, staking ETH with Lido could offer a far more attractive investment alternative than merely holding it.
Lido DAO recently voted to augment staking rewards for the largest contributors to its pool, attracting more wallets, institutions, crypto services, neobanks, and custody services. Participants who can contribute 2,500 ETH to Lido over 12-24 months are now eligible for a larger slice of the ETH staking rewards.
This increase in potential rewards further enhances Lido’s appeal to investors like Grayscale, amplifying its attractiveness in the ever-evolving DeFi landscape.
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