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. (Due to its product diversification positioning, FXS cannot simply be attributed to the LSD track, 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 Source 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, the unlocking share: 8.5 million LDO, the token belongs to: Dragonfly, and the token cost: 2 $.43. The following figure shows the allocation and unlocking of LDO:

There are 5 rounds of financing in the history of Lido, among which the financing cost of the first round of financing is extremely low ($0.0085/LDO) before the currency is issued. Specifically:

At present, the main problem 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:

The above table counts more than 90% of the addresses of the 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 until December 2022. Due to their extremely low cost, they are relatively insensitive to the current secondary market price. Judging from the initial quota, January 2023 balance statistics and current balance statistics, investors in the first round basically sell 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 the shares of investors in the primary market are cleared. (After XRP won the lawsuit against the SEC recently, 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. RPL token allocation and supply and demand relationship

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 private equity financing is 9.72 million, 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 belongs 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 addresses holding coins 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:

In October 2021, RPL will start to linearly inflate 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 will be allocated to oDAO (oracle node DAO), 15% will be allocated to the protocol DAO, and the remaining 70% will be allocated to node operators, as follows:

In the emission of RPL, node operators account for 70% of the inflation ratio 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 pledged, the more RPL emissions will be obtained; most large-scale node operators pledge at the top level; 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 amount of pledged ETH on the platform or the increase in the price of ETH, the price of RPL will be strongly supported by the pledge mechanism of the platform. The following figure shows the increase in the pledge rate of RPL:

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.