Rising interest in staked ETH: Implications for Lido, Rocket Pool and Frax Finance

• Rising interest in staked ETH boosts platforms like Aave, Lido, Rocket Pool, and Frax Finance.
• Revenue increases, but token performance lags, signaling potential challenges for the associated tokens.

Data from parsec finance has revealed a significant increase in the number of wstETH deposits into Aave over the past 24 hours. This surge in interest brings forth questions about its impact on platforms like Lido, Rocket Pool, and Frax Finance.

Token Accumulation on (w)stETH is a great level set on the DeFi market these days. $87m wstETH shoved into Aave V3 in the last 24hrs alone pic.twitter.com/aynkFTKrt2

— parsec (@parsec_finance) June 1, 2023

For context, wstETH represents wrapped staked Ethereum, which tokenizes the ETH locked in a proof-of-stake network.

By staking their ETH, users contribute to network security and consensus, receiving staking rewards in return. These deposits can also accrue interest over time, as Aave offers interest-bearing accounts for passive asset growth.

With the recent spike in Ethereum deposits, Aave stands to benefit. Users can now earn interest on their staked assets, allowing them to passively grow their holdings.

This increase in deposits signifies a growing interest in earning passive income through staking, showcasing the appeal of Aave’s interest-bearing accounts.

How were LSDs affected?

The interest in staking has not been limited to Aave alone. Platforms like Lido, Rocket Pool, and Frax Finance have also experienced increased activity.

Lido, a liquid staking protocol, has seen its daily activity surge by 46% over the last month. This growth can be attributed to users seeking to participate in staking while maintaining liquidity through Lido’s tokenized representation of staked ETH.

Rocket Pool, another prominent platform, witnessed a notable 5.4% spike in its daily activity.  Similarly, Frax Finance has seen a growth of 5.3% in user activity over the past week according to token terminal’s data.

The rise in activity on these protocols has also resulted in an increase in generated revenue

Source: token terminal

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The tokens see no correlation

However, it is important to note that this surge did not have the same effect on the tokens associated with these platforms. The market capitalization of LDO, RPL and FRAX experienced significant declines over the past month.

Furthermore, network growth for these tokens has also decreased, indicating diminished interest from new users. This suggests that while the platforms themselves have witnessed a surge in activity and generated revenue, the impact on their respective tokens has been less favorable.

Source: Santiment