@n547852o
How diversified collateral (ETH vs. LST) affects yield stability?
The choice of collateral (native ETH vs. Liquid Staking Tokens like stETH) has a nuanced impact. A portfolio using both could theoretically be more stable by diversifying the underlying asset risk, but in practice, LSTs are highly correlated with ETH. The primary stability difference arises from reward compounding. Restaking with native ETH means staking rewards are illiquid and not automatically restaked, leading to a slightly smoother, simpler yield. Restaking with an LST like stETH means you are earning the base staking yield and the AVS rewards on top. This can lead to higher aggregate APY but also combines the minor volatility of base staking with the high volatility of AVS rewards, potentially creating a more complex and slightly more variable return stream
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