Lido Staked Ethereum (stETH) slowly repegs with Ethereum (ETH) as total staking assets rose on DeFi liquidity giant Lido. stETH-ETH peg has improved to 0.9778 with the stETH price trading closer to Ethereum (ETH) price at $1073 and $1100, respectively.
Moreover, Lido’s native token LDO has jumped by more than 25% in the last 24 hours, making a high of $0.66. Despite losing some gains, the token is moving strongly with trading volume bouncing over 150%.
The Lido’s staked Ethereum depeg last month caused massive selloffs in cryptocurrencies causing the market to crash. With the stETH-ETH peg improving further, the possibility of market recovery seems in sight.
Moreover, the ongoing liquidity crisis could disappear, with market liquidation risks reducing significantly amid the increase in value of staked Ethereum. In fact, the higher the stETH-ETH price deviation, the higher will be the risk of liquidation of firms.
The massive selloff of stETH in the secondary market by Alameda, Three Arrows Capital, and Celsius last month caused a rise in insolvency risks. This forced many crypto firms including Celsius to pause withdrawals on their platforms. According to a Nansen report, Celsius has staked customer funds on Lido and currently holds at least $449 million worth of stETH in a public wallet.
In an Unchained Podcast on July 5, Lido’s strategic advisor Hasu and Gauntlet’s founder Tarun Chitra revealed that Three Arrows Capital has liquidated its stETH holdings, but Celsius do hold plenty of stETH locked up as collateral.
With Celsius looking for solutions to prevent bankruptcy, improving value of collateralized stETH may help ease some pressure. In fact, Celsius is actively paying off the outstanding debt currently.
Moreover, the Ethereum Merge will not immediately affect the liquidity of stETH as it will still be locked up for like eight or nine months after the Merge.
Lido is Ethereum’s fourth-largest DeFi protocol with a total value locked (TVL) of $4.79 billion. Also, ETH staked on Lido accounts for 31.76%, as per Dune Analytics. Many Ethereum developers including Vitalik Buterin have questioned Lido’s Ethereum staking dominance. However, the Lido community has voted to against a proposal to self-limit Ethereum staking on the platform.
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