In the last 24 hours, Lido Staked Ethereum (stETH), a currency that represents staked Ethereum on defi platform Lido, has depegged dramatically. At $1,646, stETH is down roughly 5% in the last 24 hours.
It’s expected to exchange 1:1 with Ethereum, which is presently trading at $1,771.43. On Lido, the token can be exchanged into ETH.
According to crypto researcher @SmallCapScience, the token’s depegging is due to a huge imbalance in a Curve Finance liquidity pool. The pool’s imbalance is anticipated to worsen, resulting in more stETH losses.
The $1.5 Billions Dump
This has been worsened by Alameda, a big crypto trader and one of the main holders of stETH, selling all of its assets for $1.5 billion. This might trigger a bigger bank run, causing prices to plummet, similar to what happened in Terra.
Alameda was one of the defi token’s top seven holders. Their $1.5 billion cash out, which was mostly done through swaps on Curve Finance, has the potential to set off a larger bank run.
Several parties involved in the LUNA disaster, including venture investors Jump, Three Arrows, and Andreessen Horowitz, are also large holders of stETH.
Other significant holders’ selling, notably through Curve, could further worsen the stETH liquidity pools’ imbalance, lowering the token’s value.
As a result, exchanging the token for ETH would be costly, especially for platforms that have invested consumer funds in stETH. This might lead to a bank run, with stETH depreciating as much as TerraUSD.
Celsius Network to Freeze Redemption?
Defi platform Celsius has a $1.5 billion holding in stETH, according to @SmallCapScience, with roughly $1.2 billion in debt to its customers.
Celsius will be unable to honour client redemptions if stETH continues to fall. Data shows that Celsius has regularly lost liquid cash due to hacks, exploits, and the Terra crash, exacerbating the situation.
Given that investors are seeking to redeem their positions at a rate of around 50,000 ETH per week, the firm is likely to halt redemptions soon.