Data from Glassnode shows that demand for Lido Staked ethereum (stETH) has seen a strong growth of 142% since May 2022.
Demand for stETH has far exceeded that of ethereum since the LUNA collapse
Since the advent of proof-of-stake (PoS) on the ethereum blockchain, liquid staking projects have emerged, allowing users to stake their eth through them and in return receive tokens called liquid staking derivatives.
With these derivatives, users can continue to earn rewards for staking while still having mobility over their eth, meaning they can participate in other DeFi activities with them. This makes the prospect of betting in this way more lucrative for many investors.
The largest platform in the sector is Lido, which provides its users with stETH as a representation of the coins they have staked on the platform. In its latest weekly report, the on-chain analysis firm glass node has analyzed the impact that this derivative token can have on ethereum.
<img decoding="async" class="alignnone wp-image-258346 size-large aligncenter" src="https://technicalterrence.com/wp-content/uploads/2023/10/Demand-for-Ethereum-derived-stETH-surged-142-since-LUNA-crash.png" alt="ethereum Vs stETH” width=”980″ height=”535″ srcset=”https://technicalterrence.com/wp-content/uploads/2023/10/Demand-for-Ethereum-derived-stETH-surged-142-since-LUNA-crash.png 980w, https://bitcoinist.com/wp-content/uploads/2023/10/chart-640×350.png 640w, https://bitcoinist.com/wp-content/uploads/2023/10/chart-768×420.png 768w, https://bitcoinist.com/wp-content/uploads/2023/10/chart-1536×839.png 1536w, https://bitcoinist.com/wp-content/uploads/2023/10/chart-750×410.png 750w, https://bitcoinist.com/wp-content/uploads/2023/10/chart-1140×623.png 1140w, https://bitcoinist.com/wp-content/uploads/2023/10/chart.png 1920w” sizes=”(max-width: 980px) 100vw, 980px”/>
The trend in the composition of the eth supply over the past few years | Source: ethereum/" target="_blank" rel="noopener nofollow">Glassnode's The Week Onchain - Week 40, 2023
In the chart above, you can see that a total of 23% of the ethereum supply is locked within the staking contract. Of this staked eth, 32% is done through the Lido platform, which is equivalent to 7% of the total circulating supply.
Since staking through Lido means locking up eth in exchange for stETH, the latter has essentially replaced 7% of the former’s supply. And as the chart shows, the asset share has only grown recently.
This strong growth is natural because stETH, being a yield-generating version of the asset, makes it quite attractive to investors. “There is a belief that stETH could replace eth as ethereum‘s reserve currency,” notes Glassnode.
The analytics firm has compared how adoption of the two has occurred to see if stETH is taking advantage of ethereum demand. To measure adoption, the “new addresses” metric is used, which tracks the total number of addresses created daily.
The chart below shows the trend of the indicator’s 30-day simple moving average (SMA) for the two types of ethereum.
<img decoding="async" class="alignnone wp-image-258350 size-large aligncenter" src="https://technicalterrence.com/wp-content/uploads/2023/10/1696774396_563_Demand-for-Ethereum-derived-stETH-surged-142-since-LUNA-crash.png" alt="ethereum and stETH growth rates” width=”980″ height=”537″ srcset=”https://technicalterrence.com/wp-content/uploads/2023/10/1696774396_563_Demand-for-Ethereum-derived-stETH-surged-142-since-LUNA-crash.png 980w, https://bitcoinist.com/wp-content/uploads/2023/10/chart-1-640×351.png 640w, https://bitcoinist.com/wp-content/uploads/2023/10/chart-1-768×421.png 768w, https://bitcoinist.com/wp-content/uploads/2023/10/chart-1-1536×842.png 1536w, https://bitcoinist.com/wp-content/uploads/2023/10/chart-1-750×411.png 750w, https://bitcoinist.com/wp-content/uploads/2023/10/chart-1-1140×625.png 1140w, https://bitcoinist.com/wp-content/uploads/2023/10/chart-1.png 1920w” sizes=”(max-width: 980px) 100vw, 980px”/>
The comparison of the new addresses between the two cryptocurrencies | Source: ethereum/" target="_blank" rel="noopener nofollow">Glassnode's The Week Onchain - Week 40, 2023
As shown in the chart, the 30-day SMA of new ethereum addresses has declined by approximately 5% since the LUNA crash in May 2022, meaning demand for the cryptocurrency has slowed somewhat.
Lido’s sETH, on the other hand, has seen its new addresses increase by around 142% over the same period, suggesting that the derivative token has seen accelerated adoption.
eth price
ethereum has seen a significant pullback over the past few days as the price of the cryptocurrency has now fallen towards the $1,600 level.
<img decoding="async" loading="lazy" class="alignnone size-medium aligncenter" src="https://technicalterrence.com/wp-content/uploads/2023/10/Demand-for-Ethereum-derived-stETH-surged-142-since-LUNA-crash" alt="ethereum price chart” width=”1534″ height=”877″/>
Looks like eth has plunged over the past few days | Source: ETHUSD on TradingView
Featured image by Kanchanara on Unsplash.com, TradingView.com charts, Glassnode.com