Lido Staked Ethereum (stETH), a key factor in the ongoing crypto crash, widened its rift with Ethereum and fell below $1,000 on Wednesday.
stETH dropped to as low as $959.77, before recovering to a little above $1,000 in a broader crypto market recovery. The move also appeared to have liquidated some Ethereum positions, with about $51 million liquidations happening in the past four hours.
Collateralization of stETH by beleaguered lender Celsius and hedge fund Three Arrows Capital has been a key reason behind the token’s role in the ongoing crypto crash.
A drop in stETH’s value caused positions held by Celsius and Three Arrows to be liquidated, forcing the two to dump their holdings on the open market.
While the token has now recovered to back above $1000, any further losses in stETH still present a threat to crypto markets. Its use as collateral in borrowing ETH is the main source of uncertainty.
While both Celsius and Three Arrows are taking measures to lower their liquidation levels, smaller holders on major DeFi platforms are bearing the brunt of liquidations.
Celsius appears to have added even more collateral for a $500 million position on Maker. At least for now, the lender appears to have reduced its potential for a liquidation.
Still, a Federal Reserve rate hike later on Thursday could potentially trigger more crypto losses.
Data from Coinglass shows about $51 million ETH positions were liquidated in the past four hours- nearly twice as those as Bitcoin. This came as ETH prices neared a key liquidation level for Three Arrows.
But the level- $1,014 was not breached, and ETH recovered slightly after the dip. Traders are now watching for a more sustained uptrend.
While stETH has no direct correlation to ETH prices, its perceived de-pegging had caused panic selling of ETH in the past two days. A delay to the planned merge also rattled ETH traders.
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