Ethereum News Today: Lido Finance Market Share Falls 5% to 25% Amid Staking Volatility and Leveraged Strategy Collapse

Lido Finance, once a dominant force in Ethereum staking, has seen its market share plummet to 25% in July 2025—the lowest level since March 2022, according to Tom Wang of Entropy Advisors. This represents a 5% decline over six months, with shares falling from 32% in February to 29.6% in March 2025. Centralized exchanges Binance and Coinbase now hold 8.3% and 6.9% of the staking market, respectively, while 19% of staking activity is attributed to unidentified validators, which may include both individual stakers and organizations obscuring wallet details [1].

The decline coincides with a broader upheaval in the staking landscape. Total staking deposits reached a record 36.5 million ETH in early July but subsequently dipped to 36.1 million ETH. Lido reported the largest net outflows among major staking platforms over the past month. Meanwhile, the validator exit queue surged from 1,920 to over 475,000 within a week, extending wait times to nine days. Galaxy Digital Research linked this to the Pectra update’s stricter requirements but emphasized that the primary driver was the “cascading reduction in leverage in LST-assets” [1].

Staking volatility intensified in mid-June when a wallet associated with HTX initiated mass withdrawals from Aave, extracting over 167,000 ETH. This triggered a spike in Aave’s WETH loan rates—from 2% to 18% within a week—rendering leveraged “cyclical” staking strategies unprofitable. These strategies, which rely on borrowing ETH via LST or LRT tokens to amplify staking yields, collapsed as investors liquidated positions. The sell-off destabilized Lido’s stETH token, which temporarily lost its peg to ETH, according to data from Glassnode [1].

Mark Zeller, co-founder of Aavechan, acknowledged the role of Aave’s withdrawal surge in inflating leverage ratios but noted that borrowing rates are “almost returning to normal.” The stabilization, however, has yet to restore confidence in leveraged staking models. Analysts caution that the market’s sensitivity to large-scale liquidity shifts highlights systemic risks in the staking ecosystem, particularly for protocols reliant on stable borrowing terms [1].

The decline in Lido’s market share reflects a shift in user behavior toward centralized platforms offering faster access to liquidity and clearer transparency. The rise of unidentified validators underscores challenges in tracking decentralized staking activity in a fragmented market. While Lido remains a significant player, its waning dominance signals a broader trend of decentralization and competition in the Ethereum staking sector.

Source: [1] [Lido Finance Market Share Falls to 25% Amid ETH Staking Volatility] https://coinpaper.com/10210/lido-finance-market-share-drops-to-lowest-since-2022-amidst-staking-volatility