Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/313799 
Year of Publication: 
2024
Citation: 
[Journal:] Journal of Futures Markets [ISSN:] 1096-9934 [Volume:] 45 [Issue:] 2 [Publisher:] Wiley [Year:] 2024 [Pages:] 91-117
Abstract: 
ABSTRACT This paper provides a first economic analysis of liquid staking tokens, which are derivatives representing a share of staked tokens in Proof‐of‐Stake blockchains. We document substantial time‐variation in the “liquid staking basis” as given by the price difference between a derivative staking token and its underlying cryptocurrency. We find evidence that staking rewards, concentration risks, limits to arbitrage, and behavioral factors influence this basis. The liquid staking basis is wider when the yields offered by the liquid staking protocol are low relative to the alternative of staking directly, when cryptocurrency returns are more volatile, and when secondary market liquidity is low. In contrast, it is smaller when investors pay more attention to liquid staking and when investor sentiment is positive. Furthermore, liquid staking tokens contribute a significant and overall growing amount to price discovery in the underlying cryptocurrencies.
Subjects: 
cryptocurrency
liquidity
price discovery
proof‐of‐stake
staking
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version
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