Perhaps the thing we fear the most in the cryptocurrency world is the predictions of collapse. There are estimates made by analysts on the spot. So, what does such a situation mean in the market? Obviously it changes our approaches. It affects our perspective. Our news is like that. Let’s look at the details.
A crash for cryptocurrencies?
News about Lido, the liquidity staking protocol that supports staking. Accordingly, Lido is currently on the target board of some members of the Ethereum community. It is also stated that the platform centralizes Ethereum. There are also fears that it could make the blockchain fragile. As of June 1, Lido is the largest decentralized finance protocol. DeFiLlama data indicates that the platform manages $13.2 billion in staked assets. This figure is almost double the total locked value (TVL) in MakerDAO. MakerDAO has $6.29 billion in TVL. It also only serves Ethereum.
It’s not just Lido’s dominance for TVL that critics are concerned about. It’s also about the number of validators using the protocol. When we look at Kriptokoin.com, according to on-chain data, more than 19 million Ethereum is staked on the Beacon Chain, that is, the proof-of-stake network. However, 6 million of this amount is staked through Lido. This means about 36% of all staked cryptocurrency Ethereum that passes through the liquidity staking protocol. Also, parallel data shows that 32% of all Ethereum validators use the Lido infrastructure.
Securing external attacks
In Ethereum’s proof-of-stake system, it is necessary to verify transactions. In addition, validators are needed to secure the network against external attacks. Deploying validators that no longer need to run energy-consuming and expensive equipment is critical to decentralizing the Ethereum network. The global distribution of cryptocurrency Ethereum validators will evolve into a robust platform where users and operators of the protocol, who currently manage over $26 billion in assets, will not have to worry about majority attack. This level of centralization that has emerged in Lido is causing some Ethereum community members to worry that it could destabilize the network.
In the past, Prysm, a client operator, had a significant improvement. Accordingly, it had lost a significant portion of its market share when it was discovered that over 66% of all Ethereum proof of work nodes were using their own software. Could the same intervention be necessary to prevent the expansion of the Lido? According to critics, the current community lacks the educational material and initiative to address emerging issues. So far, 32% of all validators using the LidoDAO infrastructure are more than double the limit recommended by Vitalik Buterin, co-founder of the cryptocurrency Ethereum, for any asset that wants to host the network’s validators.
Cryptocurrency LDO price may drop
With centralization questions arising, LidoDAO can be forced to decentralize even by splitting into multiple entities. However, for cryptocurrency LDO holders, any action that breaks the dominance of the protocol could have a serious impact on prices. As of June 1, LDO’s management token, LDO, is one of the top performers.
From the lows of December 2022, LDO has increased by 125% compared to spot prices as more crypto ETH holders choose to stake through the Lido Finance infrastructure to earn annual rewards from the Ethereum proof-of-stake network.
bearish warning for bitcoin
Cryptocurrency Bitcoin price is consolidating above the $26,500 support. If BTC makes a move below the $26,500 support, a drop is likely. Bitcoin is still struggling to stay above the $26,500 support zone. The price is trading below $27,250 and the 100 hourly simple moving average. There is a key bearish trend line forming with resistance near $27,220 on the hourly chart of the BTC/USD pair from Kraken. There is a corrective action in the pair at higher levels. However, if the price increases, BTC will rise even higher above the $27,500 resistance.
If the price of the cryptocurrency Bitcoin fails to break the $27,200 resistance, a downward move will follow. On the downside, immediate support is near the $26,560 level. The next major support is near the $26,500 area, where the price could start a strong decline. In the stated case, the price could decline towards the $25,500 support in the coming sessions.
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