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Rocket Pool’s rETH is dominating trading volume among liquid staking tokens, with arbitrageurs and DeFi degens converging on the token.

Data from IntoTheBlock shows rETH accounting for more than half of the liquid staking sector’s volume over the past three weeks. The token drove $28.8M worth of trades over the past 21 days, overshadowing stETH’s $6.7M despite Lido’s total value locked (TVL) outpacing that of Rocket Pool by eight times.

The data also shows increasing activity surrounding Frax’s FRXETH and SFRXETH tokens, while the dominance of Coinbase’s cbETH token has declined significantly from its mid-year highs.

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LST Transaction Volume

Speaking to The Defiant, Lucas Outumuro, head of research at IntoTheBlock, attributed the surge in rETH activity to the launch of Prisma Finance’s LST-backed stablecoin, mkUSD, alongside adoption incentives in the form of its native PRISMA token.

“We looked into it on-chain, and it appears that the spike in rETH volumes the past few weeks is linked to the launch of PRISMA,” said Lucas Outumuro. “They increased the supply caps on Nov. 2 and launched their token as incentives for people to mint mkUSD through the protocol.

“This appears to have increased demand for rETH, with deposits into Prisma spiking that day.”

Outumouro added that the jump in rETH demand from Prisma users drove up the token’s price, opening up arbitrage strategies for opportunistic traders.

“There was a lot of volume since rETH was bought on the market, driving its price to a premium relative to its ETH holdings, and then more volume to arbitrage the price back down,” he said.

The rETH token last traded hands for $2,147, while ETH is trading for $1,964, according to CoinGecko.

The surge in rETH adoption will come as welcome news to Lido skeptics, with many analysts warning that stETH’s sizable dominance could threaten the decentralization of Ethereum’s staking layer.

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Analysts have warned against a single staking entity amassing control of more than one-third of staked Ether’s supply, with Lido attracting criticism for refusing to self-limit its stake despite crossing above 32% earlier this year. Lido’s staked Ether dominance now sits at 31.5%, according to Dune Analytics.

However, an increasing number of DeFi protocols are actively seeking to drive up the adoption of minority LSTs while placing limits on the volume of stETH deposits they support.

EigenLayer, the pioneering Ethereum restaking protocol, recently launched a “governance contest” allowing holders of various LST tokens to vote for which liquid staking derivatives they would like the protocol onboard next.

EigenLayer already supports stETH, rETH, and cbETH, but has placed caps limiting deposits for said tokens.


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