Lido DAO: Ethereum Merge’s Biggest Bet Raises 400% in July

Lido DAO: Ethereum Merge's Biggest Bet Raises 400% in July

The price of Lido DAO (LDO) has increased by about 400% since the beginning of the month to reach $2.22 on July 28, the highest level in more than two months.

“Combined” LDO.

The price of LDO benefited mainly from its association with Ethereum, the leading smart contract platform in terms of total value locked (VLT) and market capitalization.

LDO in particular serves as a token of governance within the Lido DAO ecosystem, a project that offers staking services for Ethereum.

When $ETH moves, the entire ecosystem is dragged along. Best moves: Defi: $LDO $UNI $BIT $AAVE – Tier 2: $OP $MATIC. And of course, being a cryptocurrency, $ETC is the biggest pump. — Luke Martin (@VentureCoinist) July 27, 2022.

The practice of betting allows users to earn passive income without the need to sell their coins. It also allows transactions to be validated and the blockchain to be secure. In return, the protocol provides rewards to stakeholders in the form of new tokens collected and fees collected.

The operating mechanism of the Lido DAO. Source: Official website

Ethereum could become a full proof-of-stake blockchain by September 19, the tentative Merger date. A successful transition to Proof of Stake may lead to greater demand for Lido DAO services in the future.

Lido DAO has remained the main provider of staking services on Ethereum since August 2021. As of July 28, it had deposited 4.14 million Ether (ETH) into the Merge’s official depository contract, Eth2, through its staking contracts.

Total value of 2.0 ETH staked per provider. Source: Glassnode

This partly explains the more than 140% rise in LDO two weeks after the Merge release date was announced – from $1.29 on July 14th to $2.22 on July 28th.

LDO/USD daily price chart. Source: Trade View

Risks of false rupture

Despite strong fundamentals, there is a risk that the continued rise in LDO will catch bulls, mainly due to increasing divergence between their price and momentum.

On a daily chart, the rise in LDO price is accompanied by a decline in the relative strength index, suggesting that the bulls may lose their grip on the market and let the bears take over.

The same clues emerge from the constant divergence between the rise in the LDO price and the fall in its volume, as shown below.

LDO/USD daily chart with price-RSI and price-volume divergence. Source: Trade View

As a result, the LDO market is targeting an imminent correction, with an interim target below at around $1.75, down 17% from the July 28 price. This level coincides with the 0.382 Fib line of the Fibonacci chart shown in the chart below.

LDO/USD daily price chart. Source: Trade View

On the other hand, the LDO appears to have broken out of a “bullish penny”, a bullish continuation pattern whose profit targets are measured after adding the height of the previous uptrend (flagpole) to the breakout point.

Read: Experts have yet to explain the huge spike in active ETH addresses

This puts Lido DAO on course above $3.00 by September, coinciding with the 0.786 Fib line and possibly around the time the Merge was implemented. In other words, LDO could rise 45% from current price levels if the pennant pattern comes true.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect those of All investment and trading involves risk. You should do your own research before making a decision.

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