Lido DAO (LDO), the governance token of the biggest ETH staking protocol, Lido Finance, has surged nearly 48% in the past 24 hours. The move coincided with the general upwards direction of the crypto market after yesterday’s news from the US Federal Reserve. However, there are some more fundamental factors that are driving investor sentiment up.
With more than $7 billion worth of ETH staked on its protocol, Lido is the biggest player in the ETH staking space. It should also be one of the biggest beneficiaries after the Ethereum Merge in September.
Lido’s native governance token, LDO, emerged as one of the best performing cryptocurrencies this month, recording nearly 398% growth since the first day of July.
Spike After Fed’s Announcement
The price of LDO spiked from $1.498 to $2.203 at around 6:00 AM (UTC) today, according to the charts of CoinMarketCap. This led to a 70% LDO price growth since Tuesday’s $1.29 lows.
The recent LDO rally intensified yesterday after the general optimism returned to both cryptocurrency and stock markets, following the interest rate hike announcement from the United States central bank.
The Federal Reserve increased interest rates by 0.75 percentage points. However, the Fed suggested that the intensity of the hikes might slow down in the future. The positive signal led the whole crypto market to a 7% value increase. Ethereum (ETH) jumped up by more than 17% during the same time period.
Rejected Investment Proposal
Earlier this week the protocol’s governance body LIDO DAO rejected a $14.5 million proposal to sell 10 million LDO tokens to Dragonfly Capital investment fund.
This is around 1% of the token’s supply held on the protocol’s treasury, which is mostly denominated in LDO and is highly dependent on token price performance. This means that any LDO price dump might be critical for the project’s existence.
The token’s sale for Dragonfly Capital was meant to diversify the treasury of Lido DAO. At the same time, the proposal said nothing about new investors’ restrictions on selling LDO tokens on the open market immediately.
With that in mind, LDO sales to investors would have been implemented over-the-counter (OTC), i.e. outside the market and below market price. Thus, the risk of new investors dumping tokens for profit increased for the Lido community, especially when the LDO token value started to rise driven by the recovery of Ethereum (ETH).
The voting process turned into scandal though, after several whales tried to overcome the Lido DAO community’s efforts to stop new investors from purchasing LDOs without any lockup obligations.
One of the whales was discovered to have a direct connection and was funded by Alameda Research, the crypto investment giant founded by FTX’s Sam Bankman-Fried.
Set New Support
Lido DAO (LDO) trades at around $2.24 at the time of writing and has seen a more than 322% increase in its trading volume over the past 24 hours.
The token confidently broke above the 50-day Moving Average (MA) today and also above the important resistance line of $1.9 on a 4-hour chart.
In the meantime, the relative strength index (RSI) of Lido DAO (LDO) is above 73 at the time of writing, meaning that it is at the overbought territory and is at risk of short-term correction.