Here’s Why Ethereum could dump on May 15th – Lido Finance’s V2 upgrade

The Ethereum Network has undergone multiple changes and upgrades in recent years, all leading to a Proof of Stake (PoS) system. According to market analysts and on-chain data, Ethereum might experience serious pressure on the price in the near future. ETH’s price has been volatile the last couple of days, all stemming from the recent Bitcoin-Binance market shakeup.

There are several factors that could be contributing to the recent drop in Ethereum’s value. One of the most notable is the upcoming May 15th update by Lido, a decentralized platform that provides staking services for Ethereum. This update is expected to change the way that Ethereum is staked on the platform, and some investors are concerned that it could lead to a significant sell-off of Ethereum.

Ethereum staking heads for major changes – Lido Finance V2 upgrade

According to reports, the largest ETH staker, Lido Finance, announced the release of an update on May 15. In this upgrade, the withdrawal of coins from staking pools will become available. The developers claim that the withdrawal will take up to 3 days, and the initial available withdrawal amount from the pool will be about 270,000 ETH ( $500,000,000 per the current ETH price).

It is important to note that in total, more than 6 million ETH are stored in Lido, with a total value of about $12 billion. Will $0.5 billion shake the price of ETH? Crypto investors are set in for a market ride leading to May 15th and after the upgrade.

What is the Lido Finance V2 upgrade?

Following the launch of Ethereum’s Shanghai Upgrade (Shapella) in April, the leading Ethereum [ETH] staking platform Lido Finance [LDO] has slated the final on-chain vote for its V2 upgrade for May 12th.  According to the staking protocol, if the vote is successful, the V2 upgrade will go live on May 15 and facilitate direct in-protocol stETH:ETH withdrawals and staking router architecture.

In a February announcement, Lido stated that its V2 upgrade would consist of two major components: the Staking Router, a modular infrastructure that enables the development of on-ramps for new Node Operators, and Withdrawals, which will allow stETH holders to withdraw from Lido at a 1:1 ratio. 

Lido intends for its Staking Router to facilitate a more diverse ecosystem of validators. In addition, by authorizing withdrawals, users of the protocol will have the “freedom to stake and unstake at will.”

Since the launch of the Shanghai Upgrade on Ethereum, the total number of ETH tokens transferred to the ETH 2.0 deposit contract through Lido has increased by 7.2%. According to Glassnode data, as of press time, Lido held 6.1 million ETH of the total number of ETH coins staked.

The protocol’s total value locked (TVL), which stood at $11.96 billion at press time, has also increased by 5% since the Shanghai Upgrade. 

While Lido Finance’s ecosystem has grown since the Shanghai Upgrade, the value of its governance token, LDO, has decreased since then. In the past 27 days, the token’s value has decreased by 23%, falling to $1.81 at press time. 

The Lido protocol takes the ETHs withdrawals and staking Lion share

The Lido protocol should facilitate quicker withdrawals for the majority of bettors under the majority of conditions. This is made feasible by the Lido protocol buffer, whose usage is prioritized for withdrawal requests (assuming there is sufficient ETH in the buffer to fulfill them).

Specifically, assuming the present network size, the absence of an exit queue on the Beacon chain, and the absence of significant incidents: Note the following figure, but bear in mind that they may be subject to change.

1. For most stakers who use Lido (i.e those who hold less than 1000 stETH), most withdrawal requests should take less than 1 day to complete (compared to 2-6 days for a standard Ethereum withdrawal)

2. Lido withdrawal requests in the range of 1000 to 5000 ETH are also likely to be completed relatively quickly (≈ 2 days) compared to standard Ethereum withdrawals (2-6 days).

3. Lido withdrawal requests greater than 5000 ETH and up to 100,000 ETH are expected to take between 4-10 days to complete (compared to 4-8 days under a standard Ethereum withdrawal).

4. Lido withdrawal requests greater than 100,000 ETH are expected to take two weeks to complete.

Lido Finance appears to be a stakers favorite in the Ethereum ecosystem. The incoming upgrade will set and maintain the tone for the ecosystem moving forward. It is interesting to see how the market reacts to the upgrade.