Inspired by @DegenSpartan, here is a bull thesis I have written for @LidoFinance and $LDO, driven by the bullishness that is ETH staking and the future of ponzi passive income. 🧵 1/22

1/ $LDO is a valueless governance token. There is no value accrual to the token, so we are betting that there will be speculation on the token. To believe in the $LDO bull thesis, you must buy into these 3 theses first:

2/Thesis 1: $ETH staking will grow, and retail/funds will pour in to - Buy ETH - Stake ETH My biggest bull thesis for ETH is that normies will slurp up the passive incum narrative and buy ETH to stake, so they can join the revolution that brings forward their FIRE goal by 4 yrs

3/ Even if we discount retail flooding in, only 13% of ETH supply is currently staked, which means that there is a lot more room to grow if Shanghai upgrade goes smoothly

4/ Thesis 2: Custodial ETH staking and LSD protocols will grow in number of users and amount of ETH staked with them Number of ETH stakers relying on custodial or decentralised LSD solutions SHOULD grow. People will use it for 3 main reasons, and I don't see many not needing it

5/ 1. They do not have the 32 ETH required for self-staking 2. They do not have the technical know-how to stake 3. They may be able to pass the first 2 reasons, but want to be able to use ETH on DeFi protocols rather than leave it staked. LSDs will allow them to do that.

6/ Thesis 3: If the number of stakers grows, custodial ETH staking and LSD protocols as a business will grow Revenue generated from fees accrued will grow. For example, Lido applies a 10% fee on staking rewards that are split between node operators and the DAO Treasury.

7/ As revenue is paid out in the form of ETH staking rewards, USD revenue will increase exponentially if ETHUSD increases, even if the amount of staked ETH increases linearly This creates 2 ways in which Lido will have increased revenue: - Attract more stakers - ETH numba go up

8/ If we assume that all 3 theses get fulfilled: 1. ETH staking catches on w retail/instis 2. Stakers will use LSDs to stake ETH 3. LSDs as a business will grow in size/revenue Then, Lido is in prime position to capture lion’s share of a burgeoning LSD market

9/ I am not in a position to make predictions on what revenue they will generate, what P/E ratio there will be etc I have zero finance background But what I can do is make logical stepwise deductions for a bull thesis, and what needs to happen for a token price to pump

10/ I believe that when it comes to allocation of money, whether it be retail or institutions, NARRATIVES and ATTENTION ECONOMY are very important. And that’s why I think that if people were to bet on a narrative, they will want to bet on the entity with the biggest market share

11/ If you want to bet on the meme of instis coming in, and wanting a ETH staking narrative on their books, which one do you think they will go for? Low market cap protocol? Or top market share protocol? Answer this in terms of probability, and allocate your money accordingly.

12/ I will say this, it is clear that $LDO has no value accrual mechanism at the moment, and all revenue will go to the DAO treasury and node operators. It will be pure hope if you think that $LDO will eventually turn on a fee accrual mechanism, and hope is not a strategy.

13/ “But wait, if revenue and fee generation does not get accrued, then why are you harping how much that can grow, if it won’t affect token price directly?” You are right, it won’t. But we live now in an age where speculative value drives price much further than fundamentals.

14/ People are more likely to speculate if there are inherently strong fundamentals in a certain stock or coin. In the end, I think strong fundamentals are memes in which people will believe in, in order to toss their hard-earned money into tokens

15/ To be clear, I do not think having a monopoly on the LSD market, insane revenue generation and PMF will make $LDO’s price go up directly However, I believe that it will make people want to speculate on $LDO’s value and dump their money in, therefore making $LDO numba go up.

16/ Recognise that it is a ponzi, and play it accordingly. As degenspartan put it succinctly, I see $LDO as:

17/ Tokenomics: This is one weak point in my thesis I honestly don't think investor unlocks affects my thesis above What matters most probably is that there is a 1b token hard cap, so if you want to, you can monitor the FDV to compare it against ETH for “price predictions”

18/ Another weak part of my thesis is the part where we go from “this can be a solid revenue generating protocol” to “people will want to buy and speculate on its token” It may just turn out that nobody wants to speculate on its token But that's a risk we will take.

19/ Narratives that we want to monitor for this thesis: - Is the Ethereum deflationary ultrasound money thesis still intact? - Is Lido losing ground as the top LSD service provider? - Monitor Lido's revenue generated, number of users, market share in ETH staked.

20/ Wen dump? Watch for retail sentiment around ETH staking (is your weird uncle asking you about this newfangled efferium and how to get in on it because he wants to all-in his retirement fund for a comfy 10% APY) Rmb - we want to dump when it's PvE, not PvP.

21/ Bear scenarios: - ETH staking does not take off (Shanghai fucks up, vitalik’s pp is smaller than expected etc) - Competition from CeFi (Coinbase, Kraken ETH staking) - LDO and all other gov tokens get rekt by the SEC and marked as securities (thx @avi_eisen) - Hacks

22/ Useful monitors: by @DefiLlama by @hildobby_ by @tokenterminal

DefiLlama

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DefiLlama is a DeFi TVL aggregator. It is committed to providing accurate data without ads or sponsored content, as w...

https://defillama.com/lsd

Ethereum ETH Staking Deposits 🥩

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Blockchain ecosystem analytics by and for the community. Explore and share data from Ethereum, Bitcoin, Polygon, BNB ...

https://dune.com/hildobby/ETH2-Deposits

NFA DYOR ETC PLEASE ONLY BET WHAT YOU ARE ABLE TO LOSE. This is a gamble, and probably not a high beta gamble at that, given LDO’s current name awareness and mcap. Something as simple as a sc exploit can just kill all theses surrounding LDO

cc threadors and eth heads, welcome all opinions! @DegenSpartan @NorthRockLP @sassal0x @0xkyle__ @SalomonCrypto @thedefiedge @Route2FI @alpha_pls @knowerofmarkets @crypto_condom @BarryFried1 @rektdiomedes @LeftsideEmiri @DeFiSurfer808 @0xcarnation @defi_mochi

If you enjoyed this, please RT below so elon favours my account and I can rant to 15 people instead of ranting into the void🥰