LD Capital: Comparison of supply and demand of LDO and RPL tokens

Author: Yuuki, LD Capital

At present, the pledge rate of ETH has exceeded 20%, while still maintaining a good growth rate. We have detailed the fundamental market of the LSD track and different targets in previous reports. This article aims to analyze the token selling pressure and demand brought about by the non-secondary market transactions of the top two LSD targets of Lido and RocketPool from the perspective of funds, and provide a reference for the selection of targets for investment strategies with different investment periods. (FXS cannot be simply attributed to the LSD track due to its product diversification positioning, and there are deviations from the fundamentals of LDO and RPL, so it is not in the scope of discussion for the time being)

1. LDO Token Allocation and Sources of Selling Pressure

The total issuance of LDO is 1 billion, and the current circulation is 879 million; in the distribution of tokens, 40.2% belong to the team and verifiers, 34.6% belong to investors, and 25.2% belong to the treasury (the current data statistics come from Tokenunlocks, not the initial token distribution); the next large unlocking of LDO tokens will occur on August 26, 2023, and the unlocking share: 8.5 million LDO, Token Owned by: Dragonfly, Token Cost: $2.43.

The following figure shows the allocation and unlocking of LDO:

Source: Token Unlocks, LD Capital

There have been 5 rounds of financing in Lido's history, among which the first round of financing was before the currency was issued, and the financing cost was extremely low ($0.0085/LDO). Specifically:

Source: LD Capital

The main problem currently affecting the price of LDO in the secondary market is that most of the investors’ shares in the primary market have been unlocked, and the continuous profit-making situation has brought huge selling pressure to the secondary market. Due to the extremely low cost of the first round of financing, the average cost is about 0.0085 US dollars, an increase of more than 200 times compared with the current price, which needs to be paid attention to. The following table counts the addresses related to the first round of investor token distribution and the current token balance:

Source: LD Capital

The above table counts more than 90% of the addresses of investors in the first round. From the summary data, it can be seen that these low-cost investors are constantly selling tokens. The first round of investor tokens will be unlocked linearly from December 2021 to December 2022. Due to its extremely low cost, it is relatively insensitive to the current secondary market price; from the initial quota, the balance statistics in January 2023 and the current balance statistics, the first round of investors basically sold 7.41 million LDOs linearly every month. Currently, the total amount of unsold tokens in the first round of financing is 51.57 million. According to the above selling speed, the selling will continue for 7 months .

From this point of view, in the absence of major changes in Lido's fundamentals and the lack of incremental funds in the market, the secondary price performance of LDO will continue to be suppressed before investors' shares in the primary market are cleared. (After the recent XRP victory over the SEC incident, the market has lowered expectations of the impact of SEC supervision on Ethereum pledges. The price of LDO has risen sharply along with the price of "securities concept" tokens such as XRP, SOL, and ADA; the primary market investor Certus One sold 4 million LDOs at a high price. The current LDO price has fallen by 16.3% compared to the previous day's high price.)

2. Token distribution and supply and demand relationship of RPL

RPL tokens are currently in full circulation, with a total of 19.55 million tokens; the initial supply of RPL is 18 million, of which 9.72 million is private financing, accounting for 54%, and the price of a single currency is 0.21 US dollars; the public sale is 5.58 million, accounting for 31%, and the price of a single currency is 0.98; the team is attributable to 2.7 million, accounting for 15%. The public sale of RPL tokens was completed in January 2018. Due to the long period of time, the market has gone through a bull-bear cycle, and the primary market share has fully changed hands. Judging from the currency holding addresses on the chain, there is currently no selling pressure from investors in the primary market for RPL. The focus needs to be on the inflation brought about by its additional issuance.

The following figure shows the distribution and inflation of RPL:

Source: Token Unlocks, LD Capital

In October 2021, RPL will start to inflate linearly at a rate of 73,302 pieces every 28 days. It will last for 10 years, with an annual inflation rate of 5%. Eventually, the total number of RPLs will reach 30 million pieces. 15% of the inflation part is allocated to oDAO (oracle node DAO), 15% is allocated to the protocol DAO, and the remaining 70% is allocated to node operators, as follows:

Source: LD Capital, Rocket Pool

In the emission of RPL, node operators account for 70% of the inflation rate of RPL tokens. Obtaining RPL emissions requires operators to pledge RPL, and the pledge ratio is 10% -150% of the value of the user's ETH. The more RPL they pledge, the more RPL emissions they get; most large-scale node operators pledge at the top; the current pledge rate of RPL is 46.97%, and it continues to rise. From this perspective, RPL is somewhat similar to the leverage of the platform’s pledged ETH value. With the increase in the platform’s ETH pledged volume or the increase in the price of ETH, the price of RPL will be strongly supported by the platform’s pledge mechanism. The following figure shows the increase in the pledge rate of RPL:

Source: Rocket Pool, LD Capital

From the perspective of the overall data dimension, there is no selling pressure from primary market investors in RPL; since October 2021, RPL has inflated 1.55 million tokens, but 9.18 million tokens have been pledged, and the actual circulation has dropped by 7.63 million tokens. It is judged that in the absence of observed RPL business decline, the purchase brought by the agreement will continue to be greater than token inflation. (For the growth of the Rocket Pool agreement, you can follow the LD track weekly report)