Lido DAO has proposed to allocate $20 million for a buyback of its LDO token as it believes the price is very much out of sync with the fundamentals after the token price has dropped by 95% from the highest level. The plan is for the treasury to spend up to 10,000 stETH on the repurchase of the tokens, which at the current prices might amount to about 8% of the circulating supply.

However, the liquidity onchain is so limited that the DAO is even forced to consider the possibility of doing the trades through centralized exchanges and market makers. Currently, liquidity is so low that even moderately large trades, if done only onchain, would markedly affect the price.

Despite the large drop in the token price, Lido's top-level metrics from the point of view of the main ones, are rather healthy. The platform is still the leader in the liquid staking market, having a large portion of staked ETH and regularly producing revenues.

The proposal points to a bigger problem that exists across the DeFi space: governance tokens tend to be deeply discounted even when the protocol is doing well. It is a matter of time and perspective whether the market accepts the buyback plan or not as investors keep debating on the proper valuation of these tokens.

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