Discounts And Premiums On Ethereum LSD Falls Ahead Of Shanghai 2023 Upgrade

Key Points:

• Discounts and premiums for Ethereum liquid staking derivative (LSD) tokens have decreased in anticipation of the upcoming Shanghai-Capella upgrades.
• LSDs are tokens issued in exchange for ether invested in the network. The underlying ether is locked and cannot be withdrawn until the impending upgrades.

According to The Block, discounts and premiums for Ethereum liquid staking derivative (LSD) tokens have decreased in anticipation of the upcoming Shanghai-Capella upgrades.

Since the beginning of the year, the top five largest LSDs have shrunk toward their nominal value by 0.17% to 1.42%.

LSDs are tokens issued in exchange for ether invested in the network. Because the underlying ether is locked and cannot be withdrawn until the impending upgrades, they are utilized to free up liquidity.

Each LSD is typically backed by one ether, while LSDs from Rocketpool and Coinbase operates slightly differently because they are non-rebasing tokens, so their value rises in tandem with staking rewards.

Lido, Coinbase, Frax, and StakeWise, four of the significant LSDs, have consistently traded below their notional values. However, these negative premiums have fallen in recent weeks ahead of Shanghai.

Coinbase’s LSD experienced the most significant decrease in its negative premium, falling by 1.42% but being 2.7% below its notional value. While the most has changed, Frax has lost its discount and is currently trading at par with ether.

Rocketpool’s LSD continues to trade at a premium to its notional value of 1.05 ether, albeit this has decreased to 1.3% from 2.3% at the beginning of the year.

Because traders will soon be able to redeem the underlying assets, such discounts, and premiums are unsurprising as Shanghai approaches.

When withdrawals are authorized, tokens will not always trade 1:1 with their underlying assets. This is because withdrawals will still take up to a week to process, implying that individuals who want to cash out promptly on the open market will likely pay a modest premium.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your research before investing.

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