A token representing Ethereum staked on DeFi platform Lido Lido Staked Ethereum (stETH)has lost its steady value sharply in the last 24 hours.
stETH is trading at $1,695, down nearly 4% in the last 24 hours. Ethereum, on the other hand, is trading at $1,771 but stETH has lost its stable.
In a Twitter post, crypto researcher @SmallCapScience stated that the token’s loss of stable is due to a large imbalance in the Curve Finance liquidity pool. It seems quite possible that the imbalance in the pool will worsen, causing more losses in stETH.
This imbalance has been further unbalanced by Alameda, one of the largest holders of stETH, a major crypto trader who abandoned all his holdings of the $1.5 billion token. This could drastically lower prices, like the events experienced on Terra, resulting in a wider decline.
sETH May Lose Its Constant
Alameda was also known as one of the seven largest holders of DeFi token. As a result of the investor abandoning the assets, the imbalance can increase and completely upset the stable.
Other big owners of STETH stand out as a few people who were also involved in the LUNA collapse, including venture capitalists Jump, Three Arrows and Andreessen Horowitz.
Any sale by other major holders, especially through Curve, could cause further imbalances in the stETH liquidity pools, causing the price to drop further. This will make using tokens for ETH a costly affair, especially for platforms that invest customer funds in stETH.
This loss of value to be experienced will trigger larger losses, causing stETH’s losses. TerraUSD may result in a sharp depreciation.
@SmallCapScienceHe noted that DeFi platform Celsius also has a position of $1.5 billion in stETH, accumulating nearly $1.2 billion in debt to its customers.
If stETH continues to drop, Celsius may be in a position to honor customer payments. The situation is exacerbated by data showing Celsius continually losing liquid funds due to hacks, exploits and the Terra crash.
Given that traders are trying to use their positions at a rate of around 50,000 ETH per week, the firm will likely stop trading.
The firm’s native token, CEL, is already reacting to the potential scenario. The token has dropped nearly 20% in the last 24 hours from $0.5391 to its lowest level since the end of 2020.
Disclaimer: What is written here is not investment advice. Cryptocurrency investments are high-risk investments. Every investment decision is under the individual’s own responsibility. Finally, Koinfinans and the author of this content cannot be held responsible for personal investment decisions.