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Further Staked Ether Peg Deviation Threatens Another Crypto Market Collapse

08-Sep-2022 By: Divya Behl
Further Staked Ether

The exchange rate on Curve for Staked ETH (stETH) has decreased to 0.9585 ETH, deviating even more from Ethereum (ETH). 

The removal of 20,950 stETH by Three Arrows Capital, valued at around $33.76 million, and Aave's suspension of Ethereum (ETH) borrowing until the Merge have both had an influence on the stETH-ETH peg. This could lead to a new liquidity crisis like the one in June.

Ethereum (ETH) Peg Deviates From Staked Ether (stETH)

The Curve liquidity pool reports that the exchange rate for Staked Ether (stETH) has decreased to 0.9585 ETH. Additionally, the pool now holds 530,141 stETH accounting for 77.28% of the total and 155,860 ETH accounting for 22.72%.

As users unwind their positions to get the ETHW forked airdrop, the Staked Ether price has moved further away from the Ethereum (ETH) price. As Ethereum converts to PoS following the Merge, EthereumPoW intends an Ethereum hard fork. Its native token is ETHW. The stETH-ETH peg has also been impacted by Aave's suspension of ETH borrowing as well as Three Arrows Capital and whales' removal of stETH from liquidity pools.

The governance proposal to halt ETH borrowing until the Merge was approved by DeFi lending and borrowing platform Aave. Massive ETH borrowing before the Ethereum PoW hard fork and Merge could have exacerbated Aave's insolvency risk. Instadapp users have really started to unwind their positions in the stETH/ETH pool as a result of Aave stopping ETH borrowing.

The Curve ETH liquidity pool yesterday saw the removal of 20,945 stETH valued at about $33.76 million by Three Arrows Capital. In its wallets, Three Arrows currently has Staked Ether valued at nearly $31 million. Additionally, "BlueWhale0211," an ETH whale, removed 11,393.81 Staked Ether valued at $16.63 million. The peg has shifted much further as a result of these deletions of Staked Ether. Link Between

Staked Ether and Crypto Market Crash

When Staked Ether (stETH) lost its peg to Ethereum (ETH) last June, the cryptocurrency market crashed due to lack of liquidity. Crypto firms like Three Arrows Capital, Voyager, and Celsius had to declare bankruptcy as a result of the liquidity crisis in the DeFi market, and others had to halt withdrawals owing to a shortage of liquidity.

In the past 24 hours, the price of ETH and Staked Ether has decreased by 9%. At the time of writing, the price of Staked Ether is $1,457, while the price of Ethereum is $1,520.

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