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Justin Sun, the founder of TRON, has initiated a withdrawal of 52,905 ETH, equivalent to approximately $209 million, from Lido Finance. This move could potentially impact Ethereum’s prices, as suggested by historical data.
Historical Context and Potential Impact on Ethereum Prices
This withdrawal is part of a larger Ethereum accumulation strategy, under which Sun allegedly purchased 392,474 ETH at an average price of $3,027, now showing an estimated profit of $349 million. Notably, this is not the first time Sun has withdrawn large chunks of ETH. On October 4, 2023, he withdrew unstaked 80,253 ETH, valued at around $131 million, from Lido and moved it to Binance within four days. Soon after, a 5% drop was observed in ETH prices.
Analysts are now wondering if Sun will employ a similar strategy when the withdrawn assets are delivered to exchanges for possible sell-offs. The $209 million withdrawn from Lido Finance highlights the importance of Lido to Ethereum’s Proof-of-Stake infrastructure.
Lido’s Role in Ethereum’s Proof-of-Stake Mechanism
As a liquid-staking protocol, Lido solves traditional staking problems, such as resource inaccessibility and illiquidity, by allowing users to stake ETH and remain liquid with traded stealth tokens. Lido enables more than 30% of all staked ETH on the network, making it one of the backbones of Ethereum’s PoS mechanism.
Big withdrawals, such as Sun’s, raise questions about staking liquidity and possible market effects. Although Lido’s liquid staking solution makes tokens more accessible, the fear of sudden large-scale withdrawals reveals a critically vulnerable point in staking protocols. Such moves can fuel fears of reduced liquidity.
Market Volatility and Liquid Staking Solutions
One notable incident of this nature can be traced back to August 5 of this year, when withdrawals, possibly by whales, dropped ETH’s price from $3317 to $2419. The chart tracking ETH exchange outflows and price movements throughout 2024 shows that spikes in outflows often align with volatility.
Although Lido withdrawals are not immediate, given that they must go through the Ethereum staking queue, such large moves can be indicative of market changes, especially if multiple large stakeholders follow suit, causing an imbalance between staked and unstaked assets.
Additional Insights into Justin Sun’s Portfolio
Besides the ETH withdrawal, Sun deposited $964K EIGEN to HTX, a crypto exchange. Eigen is the native work token for EigenLayer, a protocol that strengthens blockchain security by allowing the restaking of collateral against intersubjective faults. This deposit further indicates that he aims to diversify the liquidity across established tokens and other high-risk tokens he might own.
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