DeFi giant MakerDAO’s community on Friday approved a proposal to adopt another staked Ethereum derivative, after Lido-Staked Ethereum (stETH) de-pegged from ETH.
In a governance proposal that saw 64% approval by the MakerDAO community, users voted in favor of Rocket Pool ETH (rETH) as a new vault type, or collateral.
The protocol will now hold an “executive vote” in the next thirty days to on-board the token as a collateral. The proposal to use rETH had been floated as early as March 2021.
rETH behaves similarly to stETH, in that it represents staked ETH, and can be redeemed for ETH once the blockchain transitions to proof-of-stake. The token is issued by staking protocol RocketPool, which is based on specifications by ETH creator Vitalik Buterin.
rETH is trading at $1,093, just a few dollars off ETH prices. In comparison, stETH is trading at 0.94 of ETH.
MakerDAO seeks to cut stETH exposure
The proposal to adopt rETH comes as the largest DeFi protocol seeks to reduce the fallout from a potential insolvency of crypto lender Celsius and Three Arrows Capital.
Both the entities have a high amount of stETH as collateral, and were seen dumping stETH to cover their positions. A liquidation of the two would see a large amount of stETH, ETH and Bitcoin being dumped on the open market.
Earlier this week, MakerDAO had also disabled direct deposits with peer Aave, amid concerns over the latter’s high exposure to stETH. The exposure makes Aave extremely vulnerable to a Celsius or Three Arrows liquidation.
Is Lido Staked Ethereum a problem for markets?
While stETH has no direct impact on ETH prices, its use as collateral on DeFi platforms can eventually liquidate ETH positions, which in turn could impact prices.
A slew of liquidations since last week, following stETH’s de-peg, have severely impacted ETH prices. The depeg was triggered by one of the token’s largest holders, Alameda Research, offloading its stake.
Focus now turns to ETH and Bitcoin prices. If the two drop below key levels, the market could see another round of liquidations, which are expected to bring valuations to mid-2020 lows.
- Bitcoin Miners Likely Behind Crash Below $19K, Here’s Why
- India’s Crypto Exchanges In Trouble? 1% Tax Keeps Traders Away
- Crypto Exchange KuCoin Denies Rumours of Them Halting Exchange Withdrawals
- Elrond Price Jumps By 9% Over This Announcement
- XRP Holding Better Than Most Altcoins, Here’s Why
- Breaking: Polygon, Major Blockchains Hit With Network Attack
- New Crypto Rules In Europe: A Global Standard For Regulation?
- Third Biggest Whale Adds 1,416 Bitcoins In Last 2 Days; Will This Pump BTC?
- ‘Big Short’ Michael Burry Says Bitcoin Crash Is Only Halfway Through
- These Whales Scoop $850 mln Worth FTX Tokens Ahead Of BlockFi Deal
- Polygon Price Analysis: $0.45 Fallout could Plummet MATIC price by 25%
- ETH Price Analysis: Can $1000 Support Undermine Selling Momentum?
- BTC Price Analysis: Technical Indicator hints Upcoming recovery for Bitcoin
- CRV Price Analysis: Buyers Prepare To Boost CRV Prices To $1
- DOGE Price Analysis: Pullback Opportunity Eyes its Next Jump to $0.1
- Sandbox Price Analysis: Emerging Pattern May Soar SAND price by 20%
- Polygon Price Analysis: V-top Reversal may Direct MATIC to $0.31 Support
- ETH Price Analysis: Is Ethereum Dropping To Three Digits?
- Bitcoin Price Analysis- BTC on Losing Streak Nearing $17800; Will it Hold?
- NEAR Price Analysis: Falling Prices Eye $3 Breakdown; Should Coin Holders Worry?