Ethereum News Today: Lido's Ethereum Staking Share Slumps to 25%—2022 Low—Amid Aave Withdrawals and Staking Volatility

Lido Finance, a once-dominant Ethereum staking protocol, has seen its market share plummet to 25% in late July 2025—the lowest level since March 2022, according to Entropy Advisors’ Tom Wang. This marks a 5% decline over six months, with the platform’s share dropping from 32% in February 2025 to 29.6% in March. Centralized exchanges Binance and Coinbase now hold 8.3% and 6.9% of the market, respectively, while 19% remains attributed to unidentified validators, likely including large institutional players or privacy-conscious stakers [1].

The erosion of Lido’s dominance coincides with broader instability in the Ethereum staking ecosystem. Total staking deposits surged to a record 36.5 million ETH in mid-July but retreated to 36.1 million ETH by late July. During this period, Lido recorded the largest net outflow among major protocols. Meanwhile, the validator exit queue ballooned from 1,920 to over 475,000 in a week, extending average wait times to nine days. Analysts note that the Pectra update’s stricter validator requirements partially explain this surge, though the primary driver was the cascading reduction in leverage for Liquid Staking Tokens (LSTs) amid shifting market conditions [1].

A pivotal trigger for the volatility was a large-scale withdrawal from Aave, a decentralized lending platform. Between June 18 and July 2025, a wallet linked to HTX exchanged withdrew 167,000 ETH, destabilizing leveraged staking strategies. These strategies rely on borrowing ETH via LSTs or LRTs to amplify returns, a practice rendered unprofitable as WETH loan rates on Aave skyrocketed from 2% to 18% within a week. The abrupt rate hike forced investors to unwind positions, contributing to Lido’s stETH token losing its peg to ETH, as observed by Glassnode [1]. Aavechan co-founder Mark Zeller confirmed that the withdrawals spiked leverage ratios but added that borrowing rates have since stabilized to near-pre-crisis levels [1].

The episode highlights the fragility of leveraged staking models, which depend on narrow profit margins and stable lending environments. Lido’s market share decline reflects both structural shifts toward centralized staking—driven by the infrastructure advantages of exchanges like Binance and Coinbase—and inherent risks in liquidity-sensitive strategies. While centralized platforms have gained traction, the unresolved challenges in decentralized protocols underscore the need for enhanced risk management frameworks. The market remains in flux, with stakeholders monitoring whether regulatory or technological developments could reshape these trends in the coming months.

Source: [1] [Lido Finance Market Share Drops to Lowest Since 2022 Amidst Staking Volatility] [https://coinmarketcap.com/community/articles/6885bba989886325aee09851/]