Liquid Staking Is Now Second Biggest Sector

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he crypto sector's second-biggest player is now liquid staking protocols, as the value of cryptocurrencies deposited in these systems has skyrocketed to a staggering $14 billion - surpassing even deposits made at decentralized exchanges.

Liquid staking is now a more sought-after option than decentralized lending or borrowing, as it allows users to keep their funds liquid and still get rewards for locking cryptocurrency in blockchain networks.

As of Monday’s European, hours, DeFi Llama reported that the total value of crypto assets held in liquid staking protocols had risen to $14.1 billion, thrusting it into second place as the largest crypto market sector. Decentralized exchanges remain at first with their deposits totalling $19.4 billion while the value locked in DeFi lending and borrowing protocols comprised third place with a sum of $13.7 billion respectively.

Investor enthusiasm is skyrocketing in anticipation of Ethereum's Shanghai upgrade, which will grant stakers the ability to retrieve their ETH and rewards for the first time. Allocating funds into liquid staking has become a top priority for many crypto investors this year – and it's easy to see why when viewing its market performance. The total value locked (TVL) across all platforms has skyrocketed by nearly 60%, proving that liquidity is truly rewarding!

No longer is decentralized lending and borrowing the sole way to gain rewards for staking cryptocurrency - liquid staking has now taken centre stage! With liquid staking, you can benefit from awards while still being able to access your locked funds.

Liquid staking's increased popularity relative to decentralized lending could also be attributed to the yield differential between the two sectors.

Lido, who leads the liquid staking market with more than 75% of it, offers an impressive, annualized percentage return (APR) on various popular tokens. For instance, 4.8% APR is offered for staked ether, 6% for solana and a whopping 6.3% APR on Polygon's MATIC token - all surpassing the rates available from Aave's top stablecoins USDT, USDC and DAI alike!

Liquid staking is expected to grow further, as the ETH staking ratio, which measures the percentage of the cryptocurrency's supply staked, is significantly lower than other layer 1 cryptocurrencies.

"Only 14% of ETH is currently being staked vs 58%, the average for layer 1 coins, Markus Thielen, head of research and strategy at Matrixport, told CoinDesk. Its likely interest in staking will continue to swell."

Jonathan

An editor at Coincrop

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Jonathan is a Coincrop staff writer based in the UK, covering the best rates for cryptocurrency earning and borrowing products. When not at work, he's likely sailing.