Lido Finance Faces Regulatory Uncertainty: Should Investors Be Concerned?

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Lido Finance, the largest liquidity staking protocol, has been facing regulatory uncertainty in the United States. Despite making a tremendous market entry in the past few years with over $9.8 billion in total value locked (TVL), Lido Finance has diversified in several chains, including Ethereum, Solana, Moonbeam, Moonriver, and Terra Classic. However, the strength of Lido Finance was significantly reduced following the collapse of Terra Luna UST last year.

Kraken’s SEC Settlement Raises Concerns for Lido Investors

Lido investors are worried that the United States Securities and Exchange Commission (SEC) will take action against the liquid staking protocol in a similar manner as it did with Kraken earlier this year. Kraken settled with the SEC for a $30 million fine for issuing unregistered securities through its staking program.

According to the United States SEC Chair Gary Gensler, all digital assets are unregistered securities apart from Bitcoin. However, the United States only accounts for 25 percent of the global market activity, leaving Lido and other staking programs to venture into 75 percent of the worldwide markets.

On-Chain Analysis Shows Spike in Trading Volume

According to the latest crypto price oracles, LDO is currently trading at around $2.63, up approximately 3 percent in the past 24 hours. With a market capitalization of approximately $2.25 billion, Lido has seen its 24-hour trading volume spike nearly 15 percent to about $278 million. The spike in volume is possibly due to increased whale on-chain activity.

According to the on-chain analysis provided by Lookonchain, Terraform Labs has sold $20 million worth of LDO in the past 24 hours.

Terraform Labs (tagged by Nansen) sold all 20M $LDO today at an average sell price of $2.07.

15.3M $LDO ($32M at that time) sold on DEX at an average price of $2.1

4.7M $LDO ($9.4M at that time) was transferred to #Binance on May 9, when the price was $2. pic.twitter.com/EYkCxnF4VU

— Lookonchain (@lookonchain) March 12, 2023

Interestingly, top investors in the LDO seed vesting have been identified as liquidating their entire unlocked assets.

Lido Staking Protocol Sees Spike in Fees and Revenue

Check the ongoing vesting of $LDO holdings for participants in Lido's Seed or Treasury VC deals using @ArkhamIntel links.

Do they still have a financial interest in Lido´s success or they have dumped and moved on?
Link to the spreadsheet: https://t.co/Q77uXEvFh5 pic.twitter.com/oAMxAhhizg

— tumilet (@tumilett) March 12, 2023

Despite the uncertainty, the Lido staking protocol has seen its fees and revenue spike in the past few days, perhaps indicating better yields ahead.

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