Ethereum has dropped from a high of 1880 to a current price of 1100 in a week since 6.7. From the performance of Ethereum last week, it can be seen that all kinds of altcoins are basically cut in half. I believe everyone has a question. What caused this drop in Ethereum? There is also when to buy the bottom of Ethereum, this position is already the rising point of last year’s bull market, bring these questions, Mr. Crab will answer them one by one!
The first is the recent intensification of the unanchoring incident of stETH.The data shows that stETH is unanchored, and the value once fell to 0.95 ETH. Due to panic, leverage and other reasons, the price may fall. However, LidoFinance, a liquidity staking protocol, responded to the recent tilt in the conversion ratio of stETH and ETH on its social networking site, pointing out that stETH is still anchored to ETH at a ratio of 1:1. stETH is the ETH2 pledge certificate provided by the pledge protocol Lido. Users can obtain liquidity and rewards while staking. When the merger of Ethereum is completed and the beacon chain is open to claim, users who hold stETH can exchange stETH back to ETH at 1:1.
Staking Ether, referred to as STETH currency, has a total supply of 189,540 STETH. The introduction states: Staking stETH, which represents the ETH you pledged in Lido, combines the value of the initial deposit and the staking reward. stETH tokens are minted on deposit and burned on redemption. The stETH token balance is pegged 1:1 to Lido's staked Ether, and the token balance is updated daily to reflect earnings and rewards. stETH tokens can be used like Ethereum, allowing you to earn shares in ETH 2.0 and benefit from the benefits of decentralized financial products.
However, according to the officially introduced mechanism, stETH is provided to stakers as a liquidity compensation scheme. As the merger date approaches, the price of stETH should equal ETH. But recently it was discovered that the price decoupling of the ETH-stETH liquidity pool on Curve has worsened. One stETH can only be exchanged for about 0.954 ETH, and the proportion in the pool has also become unbalanced, with the proportion of stETH close to 80%.
Why will stETH unanchor? The first is the reason for leveraged liquidation.According to the official statement, stETH can perform one-to-one hard exchange with ETH2.0 in the future. Only due to the time difference, this kind of exchange cannot be exchanged now, and can only be carried out after the official integration of the Ethereum mainnet in a few months. Therefore, during these months, if people need ETH, they can only exchange stETH for ETH in the market. Once there is a transaction, there must be a price, and this price will fluctuate due to market sentiment. When people dump stETH in large quantities, the price of stETH plummets.
Time goes back to 6.8. According to the monitoring of Curve Whale Watching, a large user exchanged 18,398 stETH for 17,924 ETH (worth 42,705,398 US dollars). According to Curve's official data, there is currently a deviation in the asset ratio of stETH/ETH mining pools, with ETH accounting for 27.33% and stETH accounting for 72.67%.
The price drop of stETH is mainly due to liquidation risk. As long as users put stETH as collateral on the lending platform (for example: Aave), when the market falls, they may face liquidation, resulting in the sale of a large number of stETH and the imbalance in the Curve pool.
In response to this phenomenon, there are too many retail investors using Lido and Aave to take advantage of excessive leverage. Deposit stETH into Aave and lend ETH; 3. Repeat the first step. Under this operation, if the price of stETH can be stably linked to ETH, retail investors will get more profits than simple pledge. But this method is irreversible, because stETH can only be exchanged through decentralized exchanges, so when retail investors find that the price drop of stETH is unbearable, in addition to margin calls, they can only endure high slippage clicks on exchanges or Watch positions being closed. That is to say, once the redemption pressure of stETH cannot be reduced and the price of ETH continues to fall,
In fact, as early as May 12, there was a tilt for the ETH/stETH liquidity pool on Curve.The Staking protocol says,Both stETH and Curve pools are safe (stETH can be purchased at a 1.3% discount), but there are still risks associated with leverage (such as leveraged pledges), but liquidity providers are not affected by leverage risks.
On May 13, the official news once again stated that in the context of general market turmoil, the stETH:ETH exchange ratio has deviated from its 1:1 peg. In the main curve pool, stETH is trading 4.2% lower than ETH. Long-term holders and liquidity providers have no risk, but leveraged positions of stETH have risk. If users have leveraged positions such as Aave, they may face the risk of being liquidated, and should reduce the risk, such as increasing collateral.
Then there was the panic caused by the negative news of Celsius yesterday:It can be said that the unanchoring of stETH has long been a signal, and the cause of further aggravating the unanchoring of stETH is the cause of panic, which is likely to lead to further liquidation.
Mainly from the recent negative news of the platform Celsius Network From a technical point of view, Celsius Network may be insolvent. The project has a total of 1 million ETH, but only 268,000 (nearly 27%) have sufficient liquidity; the other 445,000 are Lido’s stETH, which can only be exchanged for 287,000 ETH according to the current Curve exchange rate; the last 288,000 coins are directly pledged to Ethereum 2.0 contracts, they will be unavailable for a period of time (at least a year). At a rate of 50,000 ETH per week, Celsius will run out of liquid ETH in five weeks. While the conclusions are somewhat controversial, Celsius exposes much more than that.
When Celsius was plagued by news of "bankruptcy," it was revealed that Celsius had lost 35,000 ETH from customers, but had been hiding it for a year. Lending platform Celsius Network lost at least 35,000 ETH after the private keys of Eth2.0 staking solutions company Stakehound were lost, Dirty Bubble Media reported.
Data show that (CEL) is down more than 90% from its all-time high of $8.02 on June 3, 2021.In a series of negative news from Celsius, it was mentioned that a large part of Celsius's ETH position was stETH. According to the current 5% slippage and insufficient depth of the exchange, if you must use stETH to repay customer positions, it may cause huge losses. Controlling losses largely depends on Celsius's short-term liquidity and whether the Ethereum merger can proceed smoothly as scheduled. However, judging from the market performance, the unanchor also reflects the market's lack of trust in Celsius, further triggering panic selling.
Lido said: The exchange rate between ETH is not directly related to the underlying assets, but only reflects the price fluctuations in the secondary market and creates opportunities for others to buy stETH at a substantial discount. Sound like an opportunity? Is the de-anchoring of stETH just a price distortion behavior in the current trading market? However, it should be noted that whether stETH can be redeemed 1:1 in the future depends on whether the Ethereum mainnet can be successfully merged, and whether Lido will forcefully redeem stETH.
Maker (MKR), the largest defi lending protocol, started dumping ether.The MakerDAO vault sold 65,000 ETH at an average price of $1,155 at 11:56 yesterday to repay debts and reduce risks. The MakerDAO treasury sold 27,946.97 ETH (currently worth about $33.536 million) again to repay debts.
Yesterday, MKR sold a total of about 90,000 Ethereum to repay the DeFi debt of its own project. Of course, it is not just a case of being exposed. I believe that there are also many projects on Ethereum that sell Ethereum to resist risks, so the plummet of Ethereum is also For good reason, as the largest defi lending protocol manufacturer on ETH, there are many high hopes. In the past 24 hours, more than 521 million US dollars worth of ETH assets were liquidated. As the largest defi lending agreement, the sharp drop in ether now means that his assets will also shrink, and the assets of his project will face liquidation. He must repay his debts through shipments to maintain the normal operation of the project.
When can I buy the bottom of Ethereum or enter the market?
At present, the sell-off of MKR has not yet ended, and the sentiment has not been up, but what is certain is that the decline of Ethereum this time is definitely a wave of big opportunities, low-stakes, take the incident of stETH as an example, from my point of view It can be seen that this is the intentional lowering of the price of Ethereum by institutions. We all know that this year’s Ethereum will be merged, and low-stakes institutions will use large funds to hoard a large amount of money. After the merger of Ethereum, the effects and benefits will be brought out. This is what institutions want, and which strategy should we retail investors use to deal with the current market? My personal point of view is to try to choose a fixed investment method to face the current market situation of Ethereum. How to make a fixed investment? I published an issue before, you can refer to (That's all for today's sharing, and I will bring you an analysis of leading projects on other tracks later. If you are interested, you can pay attention. I will also sort out some cutting-edge consultation and project reviews from time to time, and welcome all like-minded people in the currency circle to explore together.) .
That's all for today's sharing, and I will bring you an analysis of leading projects on other tracks later. If you are interested, you can pay attention. I will also sort out some cutting-edge consultation and project reviews from time to time, and welcome all like-minded people in the currency circle to explore together.
