Three factors contributing to Lido DAO’s 40% price increase over the week — Surpassing Bitcoin and Ethereum.

The value of Lido DAO (LDO) has surged to its highest point in three weeks at $2.21 as of May 16, marking a 40% increase from its recent low of $1.57, recorded four days prior.

This notable recovery in double digits coincided with the performance of other leading cryptocurrencies, such as Bitcoin (BTC) and Ether (ETH). Nevertheless, LDO has significantly outperformed the overall cryptocurrency market (TOTAL), which has only risen by 4.5% since May 12.

LDO/USD daily price returns vs. BTC/USD, ETH/USD, and TOTAL. Source: TradingView

What factors are contributing to Lido DAO’s superior performance compared to the rest of the cryptocurrency market at this time? Let’s examine the three primary elements likely influencing the rise in LDO’s price.

Return of Ethereum Depositors Post-Shapella

The recovery in LDO’s price aligns with the recent net positive inflows into Ethereum’s proof-of-stake (PoS) contract.

Lido DAO serves mainly as a liquid staking platform for Ethereum, allowing users to pool their resources to become validators on Ethereum, thereby circumventing the network’s requirement of a minimum deposit of 32 ETH.

In April, Ethereum experienced a network upgrade known as Shapella, which facilitates reward withdrawals from its staking contract. Consequently, there were instances when ETH withdrawals exceeded deposits within its PoS contract.

For example, the net ETH staked in its PoS contract was 19.27 million ETH on April 11, the day before the Shapella upgrade. This figure dropped to 90,704 a week later, followed by a steady recovery, as per data monitored by Nansen.

Ethereum deposits and withdrawals into/from its PoS contract. Source: Nansen

As of May 16, the Ethereum PoS contract held over 20 million ETH, highlighting the increasing demand for liquid staking service providers like Lido DAO. The price of its governance token LDO likely benefited from this trend.

For instance, Lido DAO’s closest rival, RocketPool (RPL), has also increased by 15% to approximately $50 when compared to its low on May 12.

Launch of Lido V2 Mainnet

It is important to note that Lido DAO did not facilitate full ETH withdrawals. Instead, it provided staked Ethereum (stETH), which is theoretically pegged to ETH at a 1:1 ratio, to users that could be freely exchanged for other cryptocurrencies across various exchanges.

However, this was the case until recently.

On May 15, Lido DAO introduced the mainnet version of “Lido V2,” allowing Ethereum stakers to burn their stETH and exit the protocol at a 1:1 ratio. Following this upgrade, the price of LDO has risen by 20%, accounting for half of its 40% recovery to date.

Related: Celsius moves $781M in stETH just as Lido withdrawals open

Additionally, Lido DAO whales have contributed to the upward movement of LDO in the days leading up to the Lido V2 launch. According to data from Lookonchain, this may indicate that the “buy the rumor” phenomenon has played a role in the LDO price increase.

Due to the launch of Lido V2, we noticed 3 whales accumulating $LDO in the past week.
– 0x9EA7 withdrew 724,822 $LDO($1.52M) from #Binance at $2.01.
– 0x4E4e withdrew 655,641 $LDO($1.38M) from #Binance at $1.83.
– 0x9eda bought 570,883 $LDO with 974K $USDC at $1.71 on May 12. pic.twitter.com/S0cNUxpLw0

— Lookonchain (@lookonchain) May 16, 2023

LDO Price Rising Wedge Bounce

From a technical perspective, LDO’s 40% rebound initiated near the lower trendline of an existing falling wedge formation. Traditional analysts interpret a falling wedge as a bullish reversal pattern.

Lido DAO daily price chart. Source: TradingView

The LDO/USD pair has shown similar recovery patterns in recent history, with each rebound pushing its price toward the wedge’s upper trendline. Currently, with the price hovering around the upper trendline again, LDO may either break out or pull back to retest the lower trendline.

A breakout scenario for LDO could see the price rise to $3.35 by June 2023, representing an increase of approximately 50% from current levels. This target is derived from adding the maximum wedge height to the potential breakout point near $2.70.

Conversely, a pullback scenario could bring the LDO price down to around $1.56 by June 2023, reflecting a decrease of 30% from current levels. This price point has previously acted as both support and resistance.

This article does not provide investment advice or recommendations. Every investment and trading decision carries risks, and readers are encouraged to conduct their own research before making any decisions.