The Tie Research

Institutional Staking Update

By TJ Keel
May 04, 2023

Market Impacts of Kraken's SEC Settlement

On the evening of February 8th, Brian Armstrong, the CEO of Coinbase, took to Twitter to address rumors surrounding the SEC's purported plan to restrict institutions from providing staking services to retail customers. This announcement had an immediate impact on the market, as Ethereum's value plummeted by 6.5% within a short period.

In addition, the cbETH staking derivative offered by Coinbase experienced a sharp depreciation in value, as numerous secondary market participants hastily exchanged it for ETH, driven by fear that regulations may potentially proscribe Coinbase's staking service, thereby stripping cbETH of its intrinsic value. Despite the revelation that Kraken, and not Coinbase, had reached a settlement with the SEC, the discounted price of cbETH persisted.

With a week having elapsed since Brian's Twitter announcement and ETH's value having rebounded, it is now feasible to more accurately evaluate the changes in the Ethereum staking landscape. Currently, Coinbase's cbETH liquid staking derivative is trading at a 2.6% discount, while Lido's stETH trading at a marginal 0.1% discount and Rocket Pool's rETH trading at a premium of 1.4%.

As seen above, the governance tokens for the two largest Ethereum staking pools, Lido (LDO) and Rocket Pool (RPL), both increased in price relative to ETH by roughly 15%, and their long-term sentiment significantly outperforms Ethereum’s.

*Long-term sentiment reflects how positive/negative Twitter conversations around an asset have been in the last 50 days compared to the previous 200 days. Scores above 50 imply positive sentiment, below 50 negative.

One of the most noteworthy observations has been the shift in Twitter conversations surrounding the two dominant Ethereum staking pools, both in terms of overall conversation volume and the number of distinct Twitter accounts discussing these assets. 

As depicted in The Tie Terminal, the Twitter activity regarding Rocket Pool, indicated in green, surged in response to Brian Armstrong's Twitter thread and remained elevated following the SEC's announcement of their settlement with Kraken.

Coinbase has reaffirmed its commitment to offer retail staking services, going so far as to insist their “staking services are not securities” and that they will “happily defend [that] in court if needed.”

A few months prior to Kraken's settlement with the SEC, The Tie's CEO, Josh Frank, hosted a webinar on institutional staking, featuring esteemed panelists such as Luke Dorney (Head of Sales - EMEA, Blockdaemon), Felix Lutsch (CCO, Chorus One), and Alyson Russ (Business Development, Figment), who shared valuable insights on this topic. 

Given the evolving regulatory landscape and recent market events, the insights presented during this webinar have only grown in relevance. For a comprehensive understanding of how industry players perceive institutional staking, we highly recommend watching our webinar linked below.

Institutional Staking Webinar

This report is for informational purposes only and is not investment or trading advice. The views and opinions expressed in this report are exclusively those of the author, and do not necessarily reflect the views or positions of The TIE Inc. The Author may be holding the cryptocurrencies or using the strategies mentioned in this report. You are fully responsible for any decisions you make; the TIE Inc. is not liable for any loss or damage caused by reliance on information provided. For investment advice, please consult a registered investment advisor.

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TJ Keel

TJ Keel

TJ Keel, Author at The Tie

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