The Lido Finance liquid staking service is operating normally, despite the stETH token’s decline relative to Ethereum and a sell-off of the asset by large holders. The project developers said so.
These large swings are, in most cases, linked with the specific liquidity needs of certain market actors — they are not tied to the fundamentals of stETH or the value of the underlying assets.
All stETH issuances are verifiably backed 1:1 by ETH deposits on the Beacon Chain.
— Lido (@LidoFinance) June 14, 2022
“These large swings are, in most cases, linked to the specific liquidity needs of certain market participants — they are not tied to the fundamentals of stETH or the value of the underlying assets,” the statement said.
The team noted that all stETH issuances are verifiably backed 1:1 by ETH deposits in the PoS-Beacon Chain network.
According to the developers, after the so-called ‘Merge’ (The Merge), stETH will be exchangeable for deposited ETH and accrued staking rewards, regardless of the stETH price.
Once the Merge is complete and withdrawals are enabled (in the ‘Capella’ hardfork, estimated to be ~6 months post Merge), stETH will be redeemable for deposited ETH and accrued staking rewards, independent of secondary market stETH:ETH rate.
— Lido (@LidoFinance) June 14, 2022
According to Curve, as of writing, the discount on stETH tokens exceeds 5%.
PeckShield previously drew attention to large swaps, made by wallets allegedly linked to Three Arrows Capital (3AC). Some experts noted that the hedge fund’s operations indicated an intent to repay its debts and loans.
Against this backdrop, co-founder Su Zhu stated that 3AC “is fully committed to solving this problem”.
Against this backdrop, the community watches the actions of the crypto-lending platform Celsius, which previously suspended withdrawals, exchanges and transfers between accounts. As of this writing it holds 409 260 stETH worth $436.5 million, according to Ape Board.
Analysts from Huobi, Johnny Lowi and Andy Hu, noted that Celsius previously incurred losses of almost $71 million due to listing stETH on the staking platform StakeHound after the private-key incident. In June 2021, the latter accused Fireblocks of losing access.
“This was reported in the news a week ago, and upon learning that the investments were in danger, Celsius users began to buy back their positions. The withdrawal rate was high, about 50 000 ETH per week, which forced Celsius to sell other assets, such as stETH (in Lido staking), for ETH on secondary markets like Curve to obtain more liquidity,” the experts said.
They say that only 27% of Celsius’s ETH holdings are liquid. As a result, they say, the platform “had no choice but to sell stETH in Lido’s staking.”
“In the short term, stETH will face enormous selling pressure. Turbulence is expected in the near term,” the analysts conceded.
The discount on stETH first formed in May amid the collapse of the algorithmic stablecoin TerraUSD (UST) and the LUNA token. At that time, media reported that Celsius managed to rescue 225 000 ETH from the Anchor protocol.
Earlier in May, Goldman Sachs analysts warned that the Terra ecosystem collapse had caused contagion to the stETH token, heightening systemic risks.
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