The cryptocurrency market has been relatively quiet lately, with the only major topic of discussion being Ethereum’s long-anticipated Shanghai upgrade (Shapella). While this upgrade enables staked ETH withdrawals for the first time, investors are divided on whether it will continue to drive momentum for related sectors—particularly Ethereum (ETH) and liquid staking derivative tokens like LDO, RPL, and FXS.
Market sentiment is split: some believe the upgrade marks a “sell the news” event for liquid staking derivatives (LSD), while others argue we're only at the beginning of a broader adoption cycle. Let’s explore both sides of the debate, analyze core challenges and opportunities, and assess whether LSD tokens still have room to grow.
The Bearish Case: "Sell the News" Narrative Gains Traction
Many analysts believe that the Shanghai upgrade has already been priced in—and that once the event passes, LSD tokens may face downward pressure. One of the most vocal critics is Hal Press, founder and CEO of North Rock Digital, a crypto hedge fund.
In a series of tweets, Press argued that LSD tokens like LIDO and RPL should be treated as tactical instruments—bought ahead of major network upgrades and sold once the event concludes. He successfully applied this strategy during both “The Merge” and the Shanghai upgrade but now sees no clear catalyst for further gains.
“LSD tokens should be viewed as tools to gain more ETH. Buy them when there’s a strong narrative, sell when it’s saturated. We’ve done this twice. But now, I don’t see the next bullish catalyst on the horizon.”
Press also challenges the popular belief that staking participation will surge post-upgrade. He predicts ETH staking rates will plateau at around 20%, far below optimistic projections of 30–50%. His reasoning? Diminishing returns and increasing competition.
As more players enter the LSD space, liquidity fragmentation becomes a real issue. With multiple protocols vying for market share, fee revenue per protocol declines, leading to compressed yields and reduced token utility. Over time, this could erode investor confidence.
“Long-term, as more participants enter, liquidity becomes less stable. The entire LSD sector faces headwinds from fee compression and market share battles.”
He warns that once staking saturation hits, LSD token valuations—many of which are currently priced on future yield expectations—could face harsh reality checks. In his view, most LSD tokens are overvalued relative to ETH and likely to underperform over the long run.
Smart Contract Risks and Fee Concerns Add Pressure
Beyond macroeconomic arguments, technical concerns also weigh on the LSD sector. Critics point to smart contract vulnerabilities inherent in decentralized staking protocols. A single exploit could undermine trust across the ecosystem.
Additionally, high gas fees and protocol commissions eat into user yields. For retail investors chasing 3–5% annual returns, even small fees can significantly impact net gains. This cost barrier may limit mass adoption, especially in a low-yield environment.
Another often-overlooked issue is liquidity depth. While LSD tokens like stETH are widely used in DeFi, their trading volumes outside major pairs remain thin. This lack of deep markets increases slippage and volatility risk during large trades or market shocks.
👉 Discover how next-gen platforms are redefining staking efficiency and security.
The Bullish Counterargument: We’re Just Getting Started
Not everyone shares this pessimistic outlook. Degen Spartan, a well-known crypto influencer, acknowledges some of Hal Press’s points but argues they’re premature—perhaps by a decade.
While he agrees staking rates won’t jump overnight, Degen Spartan believes we’re witnessing an inflection point in ETH staking adoption. Currently holding about 15% of his ETH in staking positions, he plans to increase that to 95% once he confirms withdrawal functionality works smoothly.
“Most ETH holders are waiting to see withdrawals work flawlessly before committing. Once confidence builds, staking ratios will go up-only.”
He emphasizes that many early stakers used centralized services like exchanges. Post-Shanghai, there’s a major shift underway: users are moving their stakes from custodial providers to decentralized LSD protocols like Lido and Rocket Pool for greater control and composability.
This trend isn’t just about yield—it’s about utility.
Why LSD Tokens Offer More Than Just Yield
Unlike traditional staking, where funds are locked and illiquid, LSD protocols issue derivative tokens (e.g., stETH, rETH, frxETH) that represent staked ETH while remaining usable in DeFi ecosystems.
These tokens can be:
- Used as collateral in lending protocols
- Traded on DEXs without waiting for withdrawal periods
- Stacked into yield farms or vault strategies
- Integrated into complex structured products
As adoption grows, so does their network effect. The more platforms accept LSD tokens as collateral, the more valuable they become—a classic flywheel effect.
Degen Spartan also highlights the emergence of LSDfi (Liquid Staking Derivatives Finance) as a potential game-changer. This new sub-sector combines staking yields with advanced DeFi use cases like leveraged staking, yield aggregation, and cross-chain liquidity routing.
“LSDfi could be one of the main narratives over the next 12 months,” he tweeted. “It unlocks new ways to earn yield while deepening Ethereum’s economic security.”
Key Core Keywords Identified:
- Ethereum Shanghai upgrade
- LSD tokens
- Liquid staking derivatives
- ETH staking rate
- LSDfi
- stETH
- Rocket Pool (RPL)
- Lido DAO (LDO)
These terms naturally appear throughout the article to align with search intent while avoiding keyword stuffing.
Frequently Asked Questions
Q: What is the Ethereum Shanghai upgrade?
A: The Shanghai upgrade (also known as Shapella) is a major Ethereum network update that introduced the ability to withdraw staked ETH and rewards for the first time since the Merge in 2022.
Q: Why are people saying “sell the news” for LSD tokens?
A: Because the Shanghai upgrade was widely anticipated, many investors bought LSD tokens in advance. Once the event occurs and no new catalyst follows, profit-taking can lead to price declines—hence “sell the news.”
Q: Can ETH staking rates really reach 95%?
A: While 95% is unlikely in the short term due to validator queue limits and technical barriers, long-term trends suggest staking participation could rise steadily as UX improves and trust grows.
Q: What is LSDfi?
A: LSDfi refers to financial applications built around liquid staking derivatives. Examples include yield boosters, leveraged staking pools, and cross-chain bridges using staked ETH tokens as base assets.
Q: Are LSD tokens riskier than holding ETH directly?
A: Yes—while LSD tokens offer yield and DeFi utility, they carry smart contract risk, slashing risk (for solo stakers), and potential depegging during market stress (as seen with stETH in 2022).
Q: Which LSD projects are leading the market?
A: As of 2025, top players include Lido DAO (LDO), Rocket Pool (RPL), and Frax Ether (FXS). Each offers unique trade-offs between decentralization, fees, and ease of use.
👉 Explore secure and scalable ways to participate in Ethereum staking today.
Final Outlook: Growth Isn’t Over—But It’s Evolving
While short-term price action may disappoint traders betting on immediate pumps post-Shanghai, the long-term story for LSD tokens remains compelling.
Yes, near-term headwinds exist—from valuation concerns to competition and technical risks. But structural trends favor wider adoption:
- Growing demand for non-custodial staking
- Increasing DeFi integration of LSD assets
- Innovation in LSDfi protocols
- Rising trust in withdrawal mechanics
Moreover, Ethereum’s ongoing evolution—from scalability upgrades like Proto-Danksharding to stronger economic security via higher staking rates—creates fertile ground for LSD innovation.
The narrative may have shifted from “event-driven speculation” to “ecosystem-building,” but that doesn’t mean momentum has stalled. Instead, we may be entering a more sustainable phase of growth—one defined not by hype cycles, but by real utility.
👉 Stay ahead of the curve with insights into Ethereum’s evolving staking economy.
Ultimately, whether you side with Hal Press or Degen Spartan depends on your time horizon. For traders focused on immediate catalysts? The news might already be sold. But for builders and long-term investors? The liquid staking revolution is just warming up.