HashKey Capital Forecasts Liquid Staking Derivatives Will Become Most Dominant Segment In DeFi

DJ HashKey Capital Forecasts Liquid Staking Derivatives Will Become Most Dominant Segment In DeFi

Chainwire 
HashKey Capital Forecasts Liquid Staking Derivatives Will Become Most Dominant Segment In DeFi 
03-Aug-2023 / 14:00 GMT/BST 
The issuer is solely responsible for the content of this announcement. 
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Singapore - HashKey Capital, one of the largest and most prominent crypto funds based in Asia, has published the 
results of its annual report on DeFi's Liquid Staking Derivatives market. Among the findings, it revealed that the LSD 
market soared to over USD22 billion in total value locked this year, while the total market capitalization of all LSD 
projects topped USD18 billion. 
Although the wider crypto market has struggled to shake off the bear market sentiment that overwhelmed the industry in 
2022, there has been a huge surge in the growth of LSD markets since the launch of Ethereum's Shanghai Upgrade in April 
2023. The LSD market's TVL grew by more than 15% in the two months following that milestone. 
Ethereum's Shanghai Upgrade was the biggest change to DeFi's most dominant network since it underwent the Merge in 
2022, moving to a proof-of-stake consensus mechanism. With Shanghai, Ethereum benefited from significant changes in the 
EVM object format, the introduction of Beacon Chain withdrawals and L2 fee reductions. 
HashKey Capital's LSD report was led by senior researcher Henrique Centieiro, who set out to assess the status of this 
segment of the DeFi market, estimate its future growth, examine current market trends and identify its main players. 
HashKey's Research team, led by Jupiter Zheng suggest an extremely promising future for LSD investors. 
The report produced several interesting insights into the LSD market, noting that Ethereum staking is now a USD100 
billion-plus opportunity, with long-term potential to grow into a USD1 trillion sector. This potential is evidenced by 
the fact Ethereum users are now staking an astonishing USD140 million worth of Ether on the main chain each day, with 
over USD3 billion in TVL added since April's upgrade. At the same time, HashKey found that the average monthly staking 
inflow for ETH more than quadrupled in value since Shanghai was launched. 
Even more exciting is that all the evidence points towards an acceleration of this trend. Zheng's team estimates the 
percentage of staked ETH will double in the coming years to account for 45% of the cryptocurrency's total circulating 
supply, representing hundreds of billions of dollars. At the time of writing, ETH had a total market cap of more than 
USD226.2 billion. 
According to Henrique, the growing interest in ETH staking will generate rapid growth LSDs, taking market share from 
native staking and centralized exchange staking as investors chase its higher reward potential. However, the report 
notes that LSD is still a young and nascent market, and believes emerging protocols will grab a much larger market 
share from the more established protocols that are currently dominant. The report identified Rocket Pool as the 
fastest-growing LSD protocol in recent months, taking market share away from better-known players such as Coinbase's 
cbETH. According to the report's authors, this trend highlights the high regard that much of the DeFi community has for 
decentralization. 
As more investors join the market, HashKey warns that staking yields will be reduced. However, LSD composability with 
DeFi means there are still further opportunities for investors to boost their total yields. 
Validator networks are likely to become even more democratized and decentralized in future through the introduction of 
new innovations such as Distributed Validator Technology. This will result in a flood of new opportunities for 
developers, investors and crypto users alike, HashKey said. 
The report also forecasts LSDfi to grow in importance within the LSD sector by sourcing fresh liquidity, promoting 
decentralization, sharing security and boosting yields. Eventually, it will flip decentralized exchanges in terms of 
TVL and grow to become the most dominant sector of DeFI, HashKey believes. 
"In the future, any rational actor with have 100% of his or her ETH staked in LSDs," Henrique said in a statement. 
"Further implementation of the EIP-4337 standard allows fees to be paid with ERC-20 tokens, effectively making the 
strategy of holding ETH redundant." 
HashKey Capital's full report on LSD staking is available to download here. 
About HashKey Capital 
HashKey Capital is an asset manager investing exclusively in blockchain technology and digital assets, managing over 
USUSD1 billion in client assets since its inception. As one of the largest crypto funds based in Asia and known for being 
Ethereum's earliest corporate investor in the region, its mission is to bridge crypto to the mainstream while 
connecting Web2 and Web3. HashKey Capital operates in Hong Kong and Singapore, with strong connection in Japan and the 
U.S., and has invested in over 200 projects from public chains, protocols, DeFi, CeFi, Web3 infrastructure, NFT to 
Metaverse since 2015. 
 
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1695405 03-Aug-2023

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August 03, 2023 09:00 ET (13:00 GMT)