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Lido’s once-dominant presence in the Ethereum staking market has fallen to a three-year low, with its share declining to 25%.
This drop coincides with a prolonged depegging of stETH, the liquid staking token issued by the platform.
Lido’s declining market share
On July 24, Tom Wan, head of data at Entropy Advisors, cited data from Dune Analytics showing that Lido’s staked ETH volume has dropped by 5% over the past six months. This marks the lowest share since March 2022.
At the same time, the platform’s withdrawal queue has surged to its highest level since withdrawal functionality was enabled, with more than 235,000 stETH awaiting exit.
The growing exit pressure follows significant withdrawals from several major players, including Justin Sun, investment firms like Abraxas Capital, and staking platforms like Ether.fi.
Despite the significant withdrawal request, Lido remains the largest Ethereum staking provider by a wide margin. It currently holds over nine million ETH, with its nearest competitors, Binance and Coinbase, trailing significantly.
According to its website, the platform still offers a 2.8% annual percentage rate (APR) and reports more than $33 billion in total value locked.
stETH depeg
The downturn in Lido’s market position coincides with a prolonged depegging of stETH from ETH.
Blockchain analytics platform Glassnode attributed this to rising WETH borrow rates on Aave, which rendered popular leveraged staking strategies unprofitable. As a result, users began unwinding their positions, increasing sell pressure on ETH and weakening the stETH/ETH peg.
The firm also noted that a growing validator exit queue further worsened the situation, making arbitrage less efficient and slowing peg recovery.
Mark Zeller, co-founder of Aavechan, pointed to repeated large ETH movements, particularly from whales like Justin Sun, as a factor driving up Aave’s utilization rates.
According to him, these withdrawals spiked Aave’s utilization rate, making borrowing prohibitively expensive and accelerating the unraveling of leveraged positions.
Although the peg briefly broke sharply, Zeller noted that borrowing rates have since normalized and expects stability to return.
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