Crypto lending firm Celsius, which filed for bankruptcy earlier this year, is eager to retrieve its staked Ether (ETH) from the liquid staking platform Lido, which has enabled withdrawals this week. Celsius initiated the process of withdrawing its Lido staked ETH (stETH) from the protocol and requested the withdrawal of 428,084 stETH in batches of 1,000. The stash is valued at approximately $784.7 million at current prices. Once the withdrawal process is complete, Celsius will receive the equivalent in Ethereum and the stETH tokens will be burnt by Lido.
Lido is the largest staking provider with a market share of almost 30%, so Celsius could be in for a long wait to get its ETH back if requests increase. Withdrawal requests from Lido will impact the network withdrawal queue, which is a dynamic process. However, Lido stated on May 16 that it had enough ETH in its buffers to absorb the requests. Research analyst at 21Shares, Tom Wan, suggested that if unstaking requests exceed 10%, it could cause a larger number of validator exits. This would potentially lead to longer queues for withdrawals.
The cumulative amount of stETH in the withdrawal queue is 442,000 from 141 requests, valued at around $808 million, although Celsius is responsible for the majority of it. The total amount already processed is 629 ETH, according to Dune Analytics.
Celsius may use the capital retrieved from Lido as part of its restructuring efforts or to partly repay some of its $4.7 billion debts to creditors. In late February, the crypto lender converted 22,962 wrapped Bitcoin (WBTC) into Bitcoin (BTC) in a transaction valued at approximately $540 million at the time.
The rise of liquid staking protocols such as Lido provides a fascinating insight into the evolution of DeFi and the potential for staking services to unlock liquidity and expand the range of ways investors can earn revenue on their crypto holdings.
Liquid staking is a form of staking in which users can stake their assets to a staking service provider whilst still holding full control over their assets. This allows users to earn rewards on their staked assets and also have liquidity to use their assets.
The Lido Staking Service provides a reliable and flexible alternative to traditional staking that allows users to earn rewards on their Ethereum. Users deposit their ETH into Lido’s smart contract and receive wrapped stETH tokens as a representation of their staked ETH. Staking providers also enable users to delegate their votes to validators, allowing them to participate in the network’s decision-making process.
As liquid staking platforms gain popularity, it’s important to understand the potential risks involved in this form of staking. One major risk is the centralization of staked tokens into the hands of a few providers. This concentration of power can lead to situations where a single provider has oversized influence on the network. Additionally, the security risks associated with the delegation of voting power to validators can’t be ignored.
Despite the risks, the adoption of liquid staking protocols has been growing rapidly, with many seeing it as a promising avenue for unlocking liquidity in the DeFi space. Liquid staking offers a range of possibilities for investors looking to earn returns on their investments outside of traditional staking methods. As the sector continues to grow, it’s sure to be an exciting space to watch.