Ether Liquid Staking Tokens Jump on Rumors of SEC Ban for Staking Providers
Liquid staking tokens jumped overnight as investors bet on growth in decentralized staking products amid rumors of their centralized counterparts facing a possible ban in the U.S.
The liquid staking sector jumped 5.4% on average, CoinGecko data shows, while the broader crypto market capitalization slid 3.4%.
Tokens of market leader Lido jumped by 9% before retreating on Thursday. Rocket Pool’s RPL and Stader’s SD tokens rose 10% in the past 24 hours.
Liquid staking refers to the exchange of staked ether for tokenized versions of ether that can be used in decentralized finance (DeFi) applications. Uses range from using these tokens as collateral for loans or margin trading to earning yield.
As CoinDesk reported Thursday, Coinbase CEO Brian Armstrong tweeted he heard rumors that the U.S. Securities and Exchange Commission would like to ban retail investors from engaging in cryptocurrency staking.
The value of staked assets was about $42 billion in the fourth quarter of 2022, with annualized staking rewards of $3 billion, according to a report from Staked, a non-custodial staking service provider. That figure was not limited to just retail investors.
Prominent traders on Crypto Twitter hypothesized the flow of these funds into DeFi alternatives such as Lido and Stader, which may explain the immediate price bump for related tokens.
A ban on centralized staking providers in the US would be a boon for Lido. Coinbase sits at 11.5% vs Lido's 25%.— housefire (@chipflare) February 8, 2023
We can assume nearly all cbETH is from US customers. Lido will receive the vast majority of unlocked cbETH. $LDO https://t.co/VmyamW8thL pic.twitter.com/OTWtMlAT1L
The rumors come ahead of next month’s highly anticipated Shanghai upgrade on Ethereum, which will allow investors to withdraw their ether staked on the Ethereum blockchain – as staked ether cannot be withdrawn or freely traded currently.