The altcoin market is facing a new LUNA-UST case. Could the lack of coordination between StETH and ETH cause another collapse?
StETH and ETH scared as new LUNA case
Staked ETH (stETH) deviates further from Ethereum as the exchange rate on Curve drops to 0.9585 ETH. StETH-ETH price stability is fluctuating after Three Arrows Capital removed 20,945 stETH worth approximately $33.76 million and Aave paused Ethereum (ETH) borrowing until the merger begins. As a result, another liquidity crisis similar to June raises concerns.
StETH and Ethereum (ETH) mechanism deviates
Staked ETH (stETH) currency price dropped to 0.9585 ETH according to Curve liquidity pool. Also, the current pool has 155,860 ETH (22.72%) and 530,141 stETH 77.28%. The stETH price deviated further from the Ethereum (ETH) price as users loosened their positions to receive the ETHW airdrop. EthereumPoW is planning an Ethereum hard fork as Ethereum will switch to PoS after the merge takes place.
Also, Aave’s pause on ETH borrowing and whales pulling Three Arrows Capital and stETH out of their liquidity pools have impacted the stETH-ETH stable. DeFi lending platform Aave has approved a management proposal to stop ETH borrowing until the merge is complete. Prior to the Merge and EthereumPoW hard fork, massive ETH borrowing meant bankruptcy risk for Aave. In fact, Aave’s pause on ETH borrowing has caused users to loosen their position in the stETH /ETH pool.
Result of the Aave “Temporarily Pause ETH Borrowing” vote dated August 30 – September 2cryptocoin.com As we reported, crypto-focused hedge fund 3AC removed 20,945 sETH, worth approximately $33.76 million, from the Curve ETH liquidity pool yesterday. Three Arrows currently have over $31 million in Stake Ether in their wallet.
Additionally, ETH whale “BlueWhale0211” raised 11,393.81 stakes Ether worth $16.63 million. This removal of Staked Ethereum caused the stabilizer to deviate further.
Staked Ethereum’s risk of crashing
stETH lost its peg to Ethereum last June, resulting in a liquidity-induced crypto market crash. The liquidity crisis in the DeFi market has caused crypto companies such as Three Arrows Capital, Voyager and Celsius to file for bankruptcy, while others paused withdrawals due to lack of liquidity.
StETH and ETH prices are down 9% in the last 24 hours. Currently, Stake Ether price is trading at $1,542.75 while Ethereum price is trading at $1,535.54. Bitcoin is spending a similar drop below $19,000.
