Lido DAO drops 16% as Ethereum staking proposal threatens yields

Lido DAO fell 16.31% after Ethereum's EIP-8361 proposal threatened to cut staking yields from 2.6% to 1.2%, with 24-hour volume surging more than 230%.

The proposal, submitted by six researchers including Ethereum Foundation's Justin Drake and Jérôme de Tychey, would burn a rising share of validator rewards as the staking ratio climbs, reaching 100% at roughly half of ETH supply. The draft sets a saturation balance of 60.25 million ETH, with the burn fraction scaling by the staking ratio raised to the power of 1.5. An 18-month transition would temporarily double the base reward factor before decaying it back, giving stakers roughly two years to adjust.

"The curve could produce a sustained equilibrium near 50% staked with zero nominal yield, a death-knell for the security of the network," Isidoros Passadis, Chief of Staking at Lido, said on the Ethereum Magicians forum.

Lido holds $17.6 billion in total value locked, the largest position among liquid staking protocols that collectively manage $34.9 billion. Ethereum's staking ratio hit an all-time high of 33.33% on July 28, with the validator entry queue adding 1.75 million ETH per month, according to the proposal's authors. Bitmine Immersion Technologies has staked more than 5 million ETH, roughly 4.8% of circulating supply, raising centralization concerns that the proposal aims to address.

On-chain and derivatives data

On-chain data showed a positive spot netflow of approximately $214.13K, indicating more LDO moved onto exchanges than off them. Open interest rose 14.26% to approximately $67.18 million, showing traders opened fresh leveraged positions rather than reducing exposure after the selloff. The divergence between weakening spot performance and expanding futures participation suggests elevated volatility ahead.

Technical levels

LDO rebounded after testing the $0.2757 support level, with buyers responding inside a clearly defined fair value gap extending toward the $0.3000 resistance zone. The Relative Strength Index fell to 36.90, close to oversold territory after dropping below its moving average near 53.51. If buyers reclaim the fair value gap and close above $0.3000, recovery could extend toward $0.3596. Failure to defend $0.2757 would expose $0.2385 as the next major support.

The proposal remains in public review on the Ethereum Magicians forum and has not been assigned an upgrade slot. Stani Kulechov, founder of Aave, argued on X that capping staking rewards to zero above 50% staked would make Ethereum yields unpredictable and uneconomical for institutional buyers who prefer predictable cash flows. The outcome of the review process will determine whether Lido's dominant position in liquid staking faces a structural shift or a temporary repricing.

This article is for informational purposes only and does not constitute investment advice.