Quick Take:

• Lido’s LDO token increased by 7% following Jump Crypto president Kanav Kariya’s resignation.
• Jump Crypto’s consistent selling of LDO has been blamed for the token’s poor performance over the past two years.
• Lido remains a leading protocol in decentralized finance with $33 billion in user deposits.

Lido’s LDO token saw a significant rally, rising over 7%, after the announcement of Jump Crypto president Kanav Kariya’s departure. The news, shared on X (formerly Twitter), sparked an outpouring of well-wishes from industry leaders, but also a notable sense of relief among LDO’s retail investors. This reaction underscores the intricate relationship between Jump Crypto’s trading activities and LDO’s market performance over the past two years.

Jump Crypto’s Influence on LDO

During the crypto downturn triggered by Terra’s collapse in May 2022, Jump Crypto sold more than 5 million LDO tokens, according to Arkham Intelligence data. By September 2022, the firm held about 6 million LDO tokens, a figure that dwindled to just over 500,000 by this Tuesday, currently valued at approximately $1.4 million. This sustained sell-off was perceived by many retail investors as a major factor suppressing LDO’s price, earning Jump Crypto a negative reputation among LDO holders.

It remains unclear if Kariya directly influenced Jump’s decision to sell off LDO. He has not commented on the matter.

Market Reactions and Sentiment

The sentiment following Kariya’s resignation is a mix of jest and genuine relief. “It’s a mix of a joke and somewhat true,” commented Will Sheehan, founder of crypto data firm Parsec Finance, regarding the celebratory tweets. The ongoing sell-off by Jump Crypto throughout 2022 and 2023 fostered a narrative that their actions were a consistent drag on LDO’s price.

Lido’s Dominance in DeFi

Despite these challenges, Lido maintains its position as the largest protocol in decentralized finance, with around $33 billion in user deposits, as per DefiLlama. Lido streamlines the process of staking Ether, offering users an annualized yield. The protocol also issues derivative tokens that mirror the value of staked Ether, allowing users to engage in DeFi activities without losing the benefits of staking.

Lido has been highly profitable, generating $100 million in fees over the past 30 days, second only to Ethereum itself. This profitability highlights the strong fundamentals underpinning the protocol.

The Underperformance of LDO

LDO, Lido’s governance token, grants holders the right to propose and vote on changes to the protocol. However, its market performance has lagged behind other prominent DeFi tokens. For example, Uniswap’s UNI token boasts a market capitalization of $7 billion, despite Uniswap controlling less than a fifth of the crypto deposited in Lido. Similarly, MakerDAO’s MKR and Aave’s AAVE tokens have market capitalizations of $2.2 billion and $1.3 billion, respectively, though both protocols are smaller than Lido.

Many have attributed LDO’s underperformance to Jump Crypto’s selling activities, but Sheehan warns against oversimplifying the recent rally as merely a reaction to Kariya’s departure.

Broader DeFi Token Rally

The rally in LDO is part of a broader upward trend in DeFi tokens. Over the past 24 hours, UNI, MKR, and AAVE have seen gains of 4.4%, 10%, and 9.4%, respectively. Sheehan suggests that this resurgence may be a counter-reaction to the memecoin craze that has dominated the crypto landscape this year. “It feels reactionary to memes and general alt bleeding,” he said, “because these are real businesses that are much more countercyclical.”

Conclusion

The departure of Kanav Kariya from Jump Crypto appears to have lifted a perceived burden from Lido’s LDO token, sparking a notable price rally. While Jump Crypto’s past sell-offs have undoubtedly influenced LDO’s market performance, the token’s recent gains reflect a broader recovery in DeFi assets. As Lido continues to dominate the DeFi space with its substantial user deposits and strong revenue generation, the future trajectory of LDO will be closely watched by investors and industry observers alike.