The governance token of the liquid staking protocol Lido Finance, Lido DAO (LDO), has surged 227% in just two weeks — rising from $0.63 on July 13 to $2.065 by July 28. This sharp rally comes amid growing market optimism around Ethereum’s transition to Proof-of-Stake (PoS), as well as a high-profile governance proposal that has reignited investor interest.
Lido Finance is one of the most dominant players in the Ethereum staking ecosystem, managing over $6.9 billion in staked assets. With 4.26 million ETH deposited by 89,961 unique addresses, the protocol allows users to earn an approximate 3.9% annual yield through staking while maintaining liquidity via its derivative token, stETH.
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Despite its strong fundamentals, LDO — like many crypto assets — faced prolonged pressure during the 2022 bear market. The collapse of major players like Three Arrows Capital (3AC) further destabilized confidence in stETH, whose price briefly traded below parity with ETH. This, in turn, dampened sentiment toward Lido’s native token.
However, recent developments suggest a shift in momentum. Beyond macro-level expectations around Ethereum’s long-awaited "Merge" (expected in September), a new governance initiative has captured market attention and may have played a pivotal role in LDO’s price rebound.
Lido DAO’s Strategic Treasury Diversification Plan
On July 19, Jacob Blish, Head of Business at Lido Finance, introduced a governance proposal titled "Treasury Asset Diversification." The core objective? To secure sufficient stablecoin reserves to fund Lido’s operations for at least the next two years.
Under the original plan, Lido DAO proposed selling 20 million LDO tokens — roughly 4% of total supply — through a 7-day TWAP (Time-Weighted Average Price) mechanism with a 50% premium over the average price. At the time of proposal, this equated to approximately $1.45 per LDO.
The sale was structured in two parts:
- 10 million LDO sold to strategic investor Dragonfly Capital
- Remaining 10 million LDO offered to other qualified investors
Notably, there were no lock-up requirements initially, and buyers would gain full voting rights upon acquisition — raising concerns about potential centralization of governance power.
Updated Proposal: A More Cautious Approach
By July 27, the plan had evolved significantly based on community feedback and market conditions:
- Only 10 million LDO will be sold — exclusively to Dragonfly Capital; the second tranche is postponed indefinitely.
The final purchase price will be determined by the higher of:
- The original $1.45 reference price
- A 5% premium over the 7-day TWAP preceding the vote approval
- If LDO trades above $2.25 during the voting period, Dragonfly retains the right to withdraw its offer
- Crucially, all purchased tokens will now be subject to a one-year lock-up period, addressing earlier concerns about immediate dump risks
The vote commenced on July 28 at 22:00 UTC (July 29, 6:00 AM Taiwan time) and sparked intense debate within the decentralized governance community.
Why This Move Matters for Decentralized Protocols
In a prolonged bear market, even successful protocols face operational challenges. Revenue from staking fees may cover some costs, but funding development, audits, marketing, and ecosystem growth often requires additional capital.
Unlike traditional startups that raise funds through equity rounds, decentralized autonomous organizations (DAOs) like Lido must rely on their treasuries — typically denominated in their own volatile tokens. Selling these tokens during downturns can be risky, but doing nothing risks stagnation.
Lido’s approach reflects a growing trend: strategic treasury management through selective token sales to trusted partners. By partnering with a reputable firm like Dragonfly — which emphasizes compliance and long-term alignment — Lido aims to raise capital without compromising decentralization or triggering panic selling.
Moreover, the inclusion of a price floor mechanism (TWAP + premium) and lock-up period demonstrates maturity in DAO financial engineering. These safeguards help protect existing holders while ensuring that new investors are committed for the long haul.
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Market Reaction and Investor Sentiment
The announcement catalyzed a wave of buying pressure. Some analysts believe investors interpreted the Dragonfly deal as a vote of confidence from a top-tier crypto venture firm. Others argue that the prospect of reduced circulating supply — due to the lock-up clause — contributed to bullish momentum.
Additionally, anticipation around Ethereum’s Merge continues to fuel demand for staking-related assets. As more ETH gets locked into PoS validation, services like Lido become increasingly critical infrastructure.
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Frequently Asked Questions (FAQ)
Why did LDO’s price increase so sharply?
LDO surged due to a combination of factors: positive sentiment ahead of Ethereum’s Merge, renewed confidence from Lido DAO’s treasury diversification plan, and perceived endorsement by Dragonfly Capital through its planned investment.
Is selling governance tokens to VCs bad for decentralization?
It can be if not done carefully. However, Lido’s updated proposal includes a one-year lock-up and limits the sale to 2% of total supply (10M out of 1B LDO), minimizing short-term risks. The involvement of regulated firms may also bring institutional-grade accountability.
What is TWAP and why use it for token sales?
TWAP (Time-Weighted Average Price) spreads trades over time to minimize market impact. Using it ensures fair pricing and prevents large buyers from manipulating the market during a single purchase.
Will this sale dilute my LDO holdings?
No immediate dilution occurs since the tokens come from the existing treasury. However, inflation could occur in the future if more tokens are minted — though current plans don’t indicate that.
How does staking with Lido differ from direct ETH staking?
Lido offers liquid staking: users receive stETH tokens representing their staked ETH, which can be traded or used in DeFi protocols. Direct stakers cannot access their funds until withdrawals are enabled post-Merge.
Could this set a precedent for other DAOs?
Yes. Many DAOs face similar funding challenges in bear markets. Lido’s structured, transparent approach — combining premium pricing, lock-ups, and partner vetting — could become a model for sustainable treasury operations.
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Final Thoughts
Lido DAO’s decision to sell part of its treasury isn’t just about survival — it’s about strategic evolution. In an environment where innovation slows and capital dries up, proactive financial planning becomes essential.
By balancing fundraising needs with community trust, Lido demonstrates what mature on-chain governance can look like: data-driven, transparent, and resilient.
As Ethereum enters its PoS era, protocols like Lido aren’t just participants — they’re foundational pillars. And with renewed financial stability on the horizon, LDO may be positioning itself not just to endure the bear market, but to lead the next bull cycle.