History of Lido’s stETH depeg and 2026 institutional dominance

The 2022 stETH depeg and Terra collapse

The stETH to ETH ratio dropped to 0.95 on June 10, 2022. This volatility followed the May 2022 collapse of the Terra ecosystem. TerraUSD (UST) lost its peg to the US dollar, and LUNA fell from $119.51 to nearly zero. This collapse wiped $45 billion in market capitalization in one week. Before the crash, the Luna Foundation Guard held 80,394 bitcoin worth approximately $2.4 billion. The Anchor Protocol offered a 19.45% yield to UST depositors. Mass withdrawals of 375 million UST from Anchor on May 7 preceded the Terra collapse. LUNA supply increased from 1 billion to 6 trillion in three days. The market reacted to the Celsius withdrawal freeze as traders feared that a loss of the peg exceeding 10% would trigger a cascade of liquidations similar to the unfortunate events involving LUNA and UST. Celsius held $449 million in stETH in a public wallet. Margin traders using stETH as collateral for credit were at risk. The market panic sent the prices of Bitcoin and Ethereum to their 2022 lows. Do Kwon and Daniel Shin co-founded Terraform Labs in 2018 and raised $200 million from investors including Arrington Capital, Coinbase Ventures, Galaxy Digital, and Lightspeed Venture Partners.

The market reacted poorly when Celsius froze withdrawals, causing stETH to fall 6% short of the mark. The collapse of Terra and LUNA left many investors questioning the stability of the entire crypto market. In June 2022, the SEC claimed that Lido and Rocket Pool sold unregistered securities. The SEC argued that investors make an investment in a common enterprise with a reasonable expectation of profits. LUNA was one of the ten largest cryptocurrencies before the crash.

Lido mechanics and $LDO incentives

Lido maintains a 10% fee on staking rewards. This fee splits between node operators and the DAO treasury. Users earn rewards in stETH. After the Ethereum merge, 1 stETH is redeemable for 1 ETH. Lido holds 28% to 30% of all staked ETH. Total value locked fluctuates between $18 billion and $40 billion. Vitalik Buterin and Danny Ryan expressed concerns that staking dominance leads to centralization. The Lido DAO voted 99.8% to keep the protocol’s capacity uncapped. One governance proposal suggests redirecting 40% to 50% of Lido DAO revenue to $LDO stakers in ETH. This proposal includes a 14-day vesting period and a 14-day unstaking cooldown period for $LDO stakers. Staking $LDO aims to reduce sell pressure on the token. The LDO token jumped 24% to $0.66 as stETH began to slowly repeg. At the height of the depeg, stETH fell 6% short of the mark. You already know that liquid staking changed how Ethereum users access rewards.

Will the growing concentration of staked ETH in a single protocol eventually force a structural change in Ethereum’s decentralization?

The 2026 institutional expansion

Lido DAO approved a $60 million operating budget for 2026, which allocates $43.8 million for core operations and $16.2 million for discretionary funding earmarked for high-impact initiatives like liquidity incentives and institutional product development. The budget supports products like Lido V3, stVaults, and the Lido Earn products, which launched on January 30, 2026. Vaneck filed an S-1 with the SEC for a Lido Staked ETH ETF in October 2025. Wisdomtree launched a Physical Lido Staked Ether ETP in December 2025. This product is 100% stETH-backed and lists on Xetra and SIX. The product opened with assets under management between $36 million and $50 million. Lido operates with more than 683 unique node operators. The infrastructure plan includes Curated Module v2 and Staking Router v3. The GOOSE-3 proposal published in November 2025 outlines a three-year expansion roadmap. This strategy focuses on wider stETH adoption and new revenue via Lido Earn.

The shift toward institutional products aims to connect off-chain corporate finance with on-chain liquidity. The roadmap includes infrastructure upgrades and products designed for corporate treasury management. Staking rewards for institutional users remain a primary driver for these new products.

Market dominance in 2026

The total amount of staked ETH reached 9.5 million. Staking rewards for institutional users sit at 4.5% APY. Lido is the largest liquid staking provider on Ethereum. The protocol accounts for 31.6% of depositors on the Beacon Chain. Institutional interest in stETH grew as the market moved away from the volatility of 2022. The current market reflects the structural shift toward regulated products.