I set a rule for myself: when I see LST or re-staking products that sell the idea of “adding one more layer to get a little more yield,” I first ask where the returns really come from. Put plainly, there are two parts: one is the base return from the original staking, and the other is that someone is willing to pay for “borrowing your security/liquidity.” The latter sounds tempting, but it’s also the easiest to get swept up by emotions—you think it’s a steady enhancement, but it may actually be you eating a risk premium.

The risks are also very straightforward: once the underlying asset runs into problems, all the extra layers you stacked on top will shake together; whether it’s the contract, the oracle, liquidation, or governance parameter changes—any mistake isn’t a “slow bleed,” but a sudden drop. Lately, I’ve been interpreting ETF fund flows as being closely tied to investors’ risk appetite in the U.S. stock market, so I’m even more inclined to tighten my positions and not chase the “compound-interest miracle” when everyone’s sentiment is moving in sync. I’d rather make a little less than get through cycles by luck.