If you've been following Eigen's recent price action, you've likely noticed the downward trend. Many in the crypto community are speculating, and a key reason for this drop seems to be rooted in the way Eigen's staking structure affects token supply and investor behavior.

Here’s what’s happening:

How Staking Rewards Are Affecting Eigen’s Price

Eigen allows seed investors, VCs, and angel investors to stake their locked tokens and earn staking rewards. However, while the original tokens are locked (typically to ensure long-term commitment and price stability), the rewards they earn from staking are fully liquid. This means that investors can sell off these staking rewards without waiting for their locked tokens to unlock.

This system creates an avenue for early investors to continuously cash out rewards, introducing consistent sell pressure on Eigen. As these high-volume investors continue to sell their staking rewards, the impact on Eigen’s price is significant:

- 📉Continuous Sell Pressure: Since large volumes of staking rewards are being claimed and sold, the market faces ongoing sell pressure, contributing to the steady decline in Eigen's value.

- 📉Price Dilution: As staking rewards increase the circulating supply without new demand, the influx of these liquid tokens dilutes Eigen’s price and puts downward pressure on the entire market.

- 📉Negative Sentiment: Seeing seed investors, VCs, and angels dump their rewards can discourage retail investors and traders who may interpret these actions as a lack of confidence in Eigen’s long-term potential. This can result in lower demand as people shy away from buying a token that seems to be in a downward spiral.

Why It Matters🤔

For long-term holders and community members, this pattern is concerning. It’s crucial for the project’s leadership to recognize the potential impact of these sales on the token’s price stability and consider adjustments to the staking reward structure or lock-up terms.

For instance, implementing a gradual release of rewards or creating more incentives for long-term holding could help reduce the negative impact of reward dumping. In the end, aligning the incentives of early investors with the broader community's interests could restore confidence and bring Eigen’s price back to a stable path. $EIGEN #EIGENonBinance