All You Need To Know About stETH, Crypto’s Next Big Threat
In the wake of Lido staked Ethereum depeg from Ethereum, fears of a repeat of last month’s market crash are around. The Staked ETH situation has so far resulted in Ethereum dropping 7.56% in the last 24 hours.
What Is stETH?
With its liquid staking, Lido allows users to initially lock ETH to receive the corresponding amount of stETH. Exchanged in the ratio of 1:1 with Ethereum, stETH can then be reused in DeFi. But, each stETH is redeemable for 1 ETH after merge.
This means users holding stETH can only redeem ETH after the launch of the beacon chain.
“Until that point, the 12.8 million ETH in the ETH2 staking contract is illiquid. Lido stakes 32% (4.1 million) of this 12.8 million.”
The price of staked ETH depends on the market’s appetite for liquidating the token and the existing volume and liquidity. It also varies based on the chances of a successful or delayed merge as well as the smart contract risk.
Meanwhile, the price of stETH is down 6.03% at $1,495.67, according to CoinMarketCap. Whereas the stETH depeg continues to have an impact on Ethereum price, which is down 7.09% at $1,557.
Where Did The Depeg Start?
It all started since late last week when Alameda Capital, one of the largest stETH holders, sold all of its stakes in the token. The selloff made on Thursday amounted to a staggering $1.5 billion.
In a latest development, the trading firm appears to have bought back stETH, albeit at a cheaper price. A crypto trader by name Evanss6 indicated that Alameda was buying stETH.
“Seems likely Alameda is buying stETH in size (likely at steep discount) from Celsius and then selling ETH.”
DeFi platform Celsius is currently in a precarious situation with loads of funds locked into the stETH token. The ongoing depeg poses a threat to the platform as it could lead to mass redemptions. This could turnout to be yet another crisis in the crypto ecosystem.
- Standard Chartered Predicts Bitcoin Could Drop Below $100K Amid U.S.–China Trade Tensions
- Rising Demand for Verifiable Crypto Ownership Drives Launch of Trezor Safe 7
- Robinhood Lists Binance Coin as BNB Outperforms BTC, ETH, SOL YTD By Over 30%
- Bitget Partners With Google Developer Group On Hackathon To Support AI Innovation
- Can Cardano Save Kadena? Hoskinson Reaches Out After KDA Token Plunges 60% Amid Shutdown
- XRP Price Classical Pattern Points to a Rebound as XRPR ETF Hits $100M Milestone
- Chainlink Price Eyes $27 Rebound as Whales Accumulate 54M LINK
- Pi Network Price Wedge Signals a Rebound as Key Upgrades Raise Utility Hopes
- Solana Price Eyes $240 Recovery as Gemini Launches SOL-Reward Credit Card
- XRP Price Prediction Amid Evernorth’s $1B XRP Treasury Plan – Can XRP Hit $5?
- Ethereum Price Targets $8K Amid John Bollinger’s ‘W’ Bottom Signal and VanEck Staked ETF Filing
Why Trust CoinGape
CoinGape has covered the cryptocurrency industry since 2017, aiming to provide informative insights Read more…to our readers. Our journal analysts bring years of experience in market analysis and blockchain technology to ensure factual accuracy and balanced reporting. By following our Editorial Policy, our writers verify every source, fact-check each story, rely on reputable sources, and attribute quotes and media correctly. We also follow a rigorous Review Methodology when evaluating exchanges and tools. From emerging blockchain projects and coin launches to industry events and technical developments, we cover all facets of the digital asset space with unwavering commitment to timely, relevant information.
