LDO drops 96% and Lido DAO tries to reverse fall with $20 million repurchase plan

Ethereum strike remains strong, but LDO token loses almost everything in a year

The ecosystem ofDecentralized Finance (DeFi)It is going through one of its most challenging moments since the 2022 cycle.by Lido FinanceThey hold their dominance — responding by impressive23.2% of all Ethereum (ETH) blockedin staking – the governance token of the protocol, orLDOSince its historic peak in May 2023, the currency has already devalued.95,9%with a market capitalization that has shrunk to mere$255 million.

In this scenario, aby Lido DaoIt is the decentralized autonomous organization that governs the protocol that has decided to act.Buy up to $20 million in LDO tokensThe goal is to try to stabilize the price of the asset, which today oscillates between$0.90 and $1.10After being worth more than$26 in 2021The strategy is similar to those adopted by traditional companies in times of crisis, such as the repurchase of shares by Apple or Petrobras during sharp drops.

Why did the LDO fall so much?The impact of regulations and competition

The decline of the LDO is not an isolated phenomenon in the market.DeFiIt reflects a combination of factors that have affected not only governance tokens but also stablecoins and staking protocols.Regulatory pressure, especially in the United States, where the SEC (Securities and Exchange Commission) has increased the scrutiny over assets considered securities.Clarity ActRecently discussed in the U.S. Congress, it threatens to classify cryptocurrencies as securities if they do not meet certain criteria — which could include stablecoins such as Bitcoin.USDCEmitted byCircle.

Another factor is the growingEthereum’s StrikeProtocols asRocket Pool, Coinbase’s CBETH and Binance’s BETHThey have gained market share, reducing the share of Lido, which has already controlled more than32% of all ETHs on strikeIn addition, aCrypto market falls in 2022With the collapse of FTX and the collapse of LUNA/UST, it has left deep marks in investor confidence, especially in governance tokens, which are highly volatile and expectations-dependent.

For the Brazilians, this movement of Lido DAO has a direct reflection: theEthereum StrikeIt remains one of the most popular ways to earn passive income with crypto in Brazil.Foxbit, Bitcoin and Binance Marketoffer staking options with rates that vary between3% and 6% per yearHowever, the fall of the LDO raises the question:Is it worth investing in governance tokens of strike protocols?

What does the market expect from the LDO re-acquisition?

The $20 million proposed repurchase in LDO still needs to be approved by the Lido DAO community, which governs the protocol through voting.Reducing the supply of LDO in the marketIt could relieve the seller’s pressure and consequently boost the short-term price.On the other hand, if demand doesn’t keep up, the price may continue to fall, as happened with other repurchases in the crypto market.

Analysts say that aLido is still the biggest player in Ethereum’s strikeWith more than8.5 million ETHs blocked(Equivalent to about$27 billionHowever, the fall of the LDO shows that the market is increasingly skeptical of governance tokens, which often do not have a clear utility beyond voting on proposals.

Another point of attention is theLiquidity of LDOWith a daily volume of trading around$5 millionThis makes the asset risky for investors seeking stability, such as pension funds or Brazilian institutional investors who have begun exploring the crypto market recently.

The case of USDC and the interest of Ark Invest: an interesting contrast

While Lido tries to recover with a repurchase, the scenario for stablecoins like theUSDCIt is also in aCircleUSDC issuers saw their shares fall20%Recently, partly because ofClarity Actregulatory uncertainty in the U.S. However, large investors such asArk Invest, led by Cathie Wood, are betting on the opposite: they have increased their investments in stablecoins and trading protocols.DeFiby EM$16 million.

This divergence of strategies — volatile token repurchase (LDO) vs. stable asset betting (USDC) — reflects the quest for security in a still uncertain market.Law 14.478/2022, known as the Legal Framework of Cryptocurrencies), these moves are signs of how investors are positioning themselves.While some companies seek to mitigate risks with repurchase, others bet on stable assets them refuge.

What should the Brazilians look at?

Brazilian enthusiasts and investorsDeFi, the situation of Lido and LDO serves as a warning about the risks of exposing yourself too much to governance tokens. While Ethereum staking remains an attractive option — especially for those seeking passive income — it is critical to diversify and understand the risks involved.The Global Regulationwill continue to impact the market, and decisions such as theClarity ActYou can reset the game to stablecoins and protocols.

Another important point is theInstitutional AdoptionWhile large funds such as Ark Invest are betting on stablecoins, the Brazilian market is still struggling with this aspect.Bitcoin and FoxbitInvestors should pay attention not only to promised returns, but also to the financial health of protocols and the transparency of their operations.

Finally, Lido DAO’s decision to repurchase LDO will be an important test for the market. If successful, it can signal a temporary recovery. If it fails, it can further arouse mistrust in governance tokens. In any case, one thing is certain: the market of governance.DeFiBrazil and the world are maturing, and only projects with solid foundations and transparency will survive in the long run.