LDO price moved up more than 5% during Thursday’s trading session as on-chain voting opened for the NEST automatic buyback system. However, this daily movement has not yet reversed LDO’s weekly trend, which is still down 16.7%, lagging behind the broader crypto market’s 1.3% gain.
Exchange trading activity has also started to slow down. LDO’s daily transaction volume reached $62.2 million, down 11% from the previous day’s performance. The governance token had previously rallied 65% throughout July before its momentum halted at the resistance level around $0.40.
Buyback Funds Will Not Be Burned
The NEST (Network Economic Support Tokenomics) system brings a different approach to utilizing the Lido protocol’s surplus revenue. A portion of this excess revenue is used to buy back LDO tokens from the open market via CoW Swap. Once purchased, half of that allocation is converted into wstETH.
Both assets are then paired to provide liquidity in a Curve pool. Unlike the routine mechanism of other projects, these bought-back LDO tokens will not be burned. Lido DAO will fully control the liquidity provider (LP) tokens from the pool and let the circulating LDO supply remain intact.
The final voting phase to implement the NEST mechanism has been running since August 5 and will close on August 8 at 14:00 UTC. Based on the track record of the previous snapshot, the system secured solid support with 52.37 million LDO, or equivalent to 94.5% of voters supporting the final design’s implementation.
Threat of the Tapered Issuance Burn Proposal
The main pressure holding LDO back actually comes from the network’s base layer: the EIP-8361 draft. The Ethereum proposal, dubbed Tapered Issuance Burn, aims to burn a portion of validator rewards as the amount of ETH locked in the staking system continues to rise.
In its projected scenario, if the volume of staked ETH breaches the 50% limit of Ethereum’s total supply, rewards originating from new coin issuance could shrink drastically to near-zero. Although the EIP-8361 document is still in draft status and has not been approved, traders are starting to price this threat into the valuation of liquid staking platforms. Lido, as the largest provider, is feeling the most significant impact from this situation.
LDO Sell Signal Conditions
This external pressure has left its mark on the price chart. LDO’s daily Relative Strength Index (RSI) sits at 37.57, indicating seller dominance as it remains depressed below its average signal line at 53.56.
While the internal move through NEST does strengthen the protocol’s liquidity, market sentiment tells a different story. Until Ethereum provides definitive clarity regarding the future of validator yield rules, LDO holders must be prepared to bear the risks of policies they cannot control. Sourced from crypto.news.
Also read: What Is DeFi (Decentralized Finance)?
Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
