Celsius, Staked Ethereum (stETH) Are Pummeling DeFi Valuations

The DeFi space is facing a sharp drop in valuation amid concerns over the Celsius suspension and the Lido-staked Ethereum (stETH) de-pegging.

Data from aggregator DeFi Llama shows that the total value locked into DeFi shrank by nearly 20% in the last 48 hours, to a one-year low of $79 billion.

A mix of factors are influencing FUD in the DeFi space. Celsius’ recent suspension of withdrawals stemmed from the de-pegging of stETH from Ethereum (ETH) in secondary markets. This in turn has caused a shock selloff in ETH– one that has also extended to broader crypto markets.

Ethereum meltdown causes chaos in valuations

Given that Ethereum is the largest blockchain by DeFi valuation, a slump in the token is causing widespread losses in the space.

But a bulk of these are still centered around Celsisus, stETH and Lido. Lido- which was once the biggest DeFi protocol ever, has tumbled out of the top three. It also logged the biggest drop among its major peers in the past week, losing nearly 28% of total value locked (TVL).

While Lido is attempting to mitigate the fallout from a potential stETH crash, 99% of its $5.7 billion TVL is from Ethereum staking on the platform.

A vault on Maker DAO- the biggest DeFi platform by TVL, has reportedly dumped 65,000 ETH to decrease the platform’s risk exposure, signalling further headwinds for DeFi.

DeFi faces its second Terra in one month

With TVL dropping across the board, DeFi may be set for its second major selldown after the Terra crash in May.

Terra spurred a $70 billion crash in total valuation, over the span of 10 days. The blockchain, at its peak, was the second-largest DeFi player by TVL.

But a month later, Lido and Celsisus could spur another crash of similar magnitude. Comparisons between the two are already being made, given that the two share several major investors.

Three Arrows Capital and Jump Crypto- all major investors in Terra, are also stakeholders in Lido through stETH.

A stock market rout, coupled with weak macroeconomic conditions has also largely pressured crypto valuations this year. Volatility is also likely to spike ahead of a Federal Reserve meeting this week.

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Ambar Warrick

With more than five years of experience covering global financial markets, Ambar intends to leverage this knowledge towards the rapidly expanding world of crypto and DeFi. His interest lies chiefly in finding how geopolitical developments can impact crypto markets, and what that could mean for your bitcoin holdings. When he isn't trawling through the web for the latest breaking news, you can find him playing videogames or watching Seinfeld reruns. You can reach him at [email protected]

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