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Ethereum Crypto Crash Reason: Another Terra (Luna)? What is this staked Ethereum that may

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Ethereum crypto crash reason: A DeFi derivative version of Ethereum may be pushing the crypto markets down, reports suggest. The price of Lido Staked Ethereum (stETH) has diverged sharply from the price of Ethereum (ETH) in the last 48 hours. Theoretically, however, the stETH token in supposed to trade at a 1:1 peg to ETH. 

At the time of writing, stETH was trading at $1409.57, down 5.4 percent in the last 24 hours while Ethereum was still trading at $1469. Yesterday, stETH had fallen by over 10 percent to $1513 while Ethereum was trading at $1582. 

A report by CoinGape said that stETH has been depegging since late Thursday, triggered by a $1.5 billion dump by Alameda Capital, which was one of the largest holders of the staked Ethereum. Alameda has sold all of its stETH holdings. 

Even as stETH is said to have no direct link with ETH, reports say that losses in stETH might have triggered panic selling of Ethereum, the second largest crypto by market capitalisation.

ALSO READ | Top crypto prices today

In the last 24 hours, ETH price has dropped to $1464, falling over 6 percent. In fact, in the morning today, ETH price was down by around 13 percent to $1460, its lowest this year. On February 28th last year, ETH had touched a low of $1416. 

What is stETH?

Lido Finance’s stETH is a derivative backed 1:1 by ETH. Users receive the staked derivative in return when they stake ETH on the Lido Finance platform. The platform allows users to access the value of their staked tokens while staking. However, they cannot unstake the actual Ethereum until the completion of the the transition of Ethereum to a proof-of-stake network, the date of which is unknown. 

In past, stETH holders were able to sell their stETH in the open market, But there was always some discount, which has increased sharply recently.  

ALSO READ | Top crypto crash gainers

One of the reasons behind the fall in stETH price is said to be the large scale selling of the token by its owners. 

Staked ETH is currently used as a collateral to borrow more ETH on DeFI platforms. However, if its price falls sharply, then holders may be forced to sell their stETH in the open market, leading to, may be, a bigger fall in prices of Ethereum and other cryptos. 

(The above article is for information purpose only. Cryptos and other virtual digital assets are unregulated in India. They are considered extremely risky for investment. Please consult your financial advisor before making any investment decision)





Read More: Ethereum Crypto Crash Reason: Another Terra (Luna)? What is this staked Ethereum that may

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