NEWSLETTER
eth price hit a new 3-year high of $3,274 on February 27, a rare dynamic seen in liquidity staking derivatives (LSD) markets could boost it further.
Lido (StETH) price has outperformed ethereum in each of the last 4 trading days, as the new eth 2.0 bet emerged as the main theme of the current ethereum price rally. Historical trends and beacon chain activity provide insight into how this could impact eth price action in the coming days.
Liquidity Staking Derivatives (LSD) Set New Record Amid eth Price Rally
ethereum's transition to proof-of-stake consensus in 2023 led to the emergence of liquid stake derivatives (LSDs), tokens that represent staked cryptocurrencies.
LSD serves two critical purposes. First, they give investors access to the liquidity of their staked eth coins while they are locked up on the beacon chain, thereby mitigating opportunity cost. Second, they facilitate the participation of retail investors who are unable or unwilling to meet the 32ETH liquidity requirement and the technical complexities of running a node.
Leading LSDs like Lido (StETH) and Rocket Pool (RETH) are pegged to eth prices. However, during times of intense market demand, the real-time prices of these tokens marginally exceed the price of eth. This rare market phenomenon has been observed in the last 4 business days, the longest streak since the Proof of Stake transition in 2023.
The chart above shows that since February 23, liquidity staking-derived token prices have outperformed eth, indicating growing demand for passive income among ethereum investors.
Lido (StETH) price closed above eth on 3 consecutive trading days, a rare market dynamic that has often preceded eth price increases historically.
ethereum beacon chain contracts received 205,085 eth over the weekend, further affirming the bullish outlook.
eth Stakers Make $740M Beacon Chain Deposits in 3 Days
According to official data from the Beacon chainAs of Friday, February 23 alone, 30.7 million eth was locked in staking contracts on the ethereum beacon chain. But interestingly, by the close of February 26, investors had deposited another 228,117 eth, bringing the total stake to 30.9 million.
<img decoding="async" width="1024" height="324" src="https://crypto.news/app/uploads/2024/02/Screen-Shot-2024-02-27-at-10.40.57-AM-1024×324.png” alt=”ethereum (eth) Staking Balances vs. Active Validators”/>
With the price of eth currently trading above $3,230, as of press time on February 27, the newly staked coins in the last 3 days are worth approximately $740 million. For ethereum's short-term price action, this steady rise in eth 2.0 bets is bullish for several reasons.
Firstly, it improves the security and efficiency of the PoS network, which is crucial during periods of high market activity. More importantly, it temporarily reduces the number of coins available for trading on the open market.
The surge in demand seen in LSD like Lido suggests that the majority of coins staked in eth could remain out of circulation for a longer period. By earning StETH, users can optimize their passive income and participate in DeFi activities, in addition to the 4% APR from the beacon chain.
Given the prevailing bullish sentiment surrounding cryptocurrency markets, these crucial factors could combine to accelerate eth's price rally towards the $3,000 mark in the coming weeks.
ethereum Price Forecast: $3,360 Is the Next Big Hurdle
In summary, the market tightness induced by the increase in deposits at stake puts the price of ethereum in a prime position for an accelerated rally towards $3,500. However, in the short term, bullish traders face a major hurdle in the $3,360 territory.
IntoTheBlock's Global In/Out of Money (GIOM) data groups all existing eth holders based on their historical entry prices. Currently, it shows 1.2 million addresses that purchased 579,890 eth at an average price of $3,366.
This group of holders could create a hurdle if they choose to book some profits as Etherum prices approach their breakeven point.
However, if the bulls can achieve a decisive break above $3,360, a retest of $3,500 could be in play as predicted.
On the downside, bears could overturn this optimistic prediction if ethereum price falls below $3,000. However, as seen above, the 1.9 million addresses that acquired 1.8 million eth at a minimum price of $3,037.
To avoid falling into losses, those investors could cover their positions and possibly cause an instant rally.
