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Ethereum whale withdraws 100million in ETH from Curve: DeFi lending under threat

 


An “Ethereum whale” (holders of large amounts of ETH) removed 84,131.76 ETH from Curve Finance’s DeFi protocol, causing stETH price to drop to 0.9671 ETH. If the decoupling continues, numerous DeFi investors could be liquidated and a domino effect like the Celsius crash could follow.

The Ethereum whale transferred its stETH from Curve to address 0xf44Ac73b957B28207504Ee2fd5d51eCbfeF7d8fF. There is now a little more than 85,000 ETH (equivalent to around 100 million US dollars (!)) on this address.


Decoupling puts DeFi borrowers at risk

As data from Dune Analytics shows, the stETH price crashed to 0.9671 Ethereum shortly after the wale’s withdrawal, but then recovered to 0.9790 ET H. Actually, the stETH staked in the DeFi protocol should be at a 1:1 ratio be exchangeable for ETH. However, the exchange rate also depends on the supply and demand of traders.

The decoupling of stETH and ETH price could affect users planning to withdraw their stETH from the blockchain after the Ethereum Shanghai upgrade .Additionally, decoupling may cause problems for DeFi users using Ethereum as collateral in DeFi products. If the stETH price falls below a certain threshold, the DeFi protocols liquidate the traders' positions, ie the traders lose the collateral deposited in the protocols.


The history of stETH and the Celsius crash

Before the merge, which switched the blockchain's consensus mechanism from proof-of-work to proof-of-stake, Ethereum users could deposit 32 ETH on the beacon chain. In this case, users had the opportunity to be chosen as validators and earn so-called “staking rewards”.


However, smaller investors have also been able to earn some of these rewards by stacking their ETH in pools like Rocket Pool or Lido. The staking pool offered them stETH as rewards. This is essentially a type of promissory note that stakers can exchange for ETH at a 1:1 ratio once the Shanghai Upgrade enables ETH withdrawals.


After crypto lending platform Celsius used its customers' Ethereum deposits for Lido's liquidity pool in the middle of the year, the company's liquidity difficulties worsened. Celsius uses stETH as collateral to borrow funds on the Aave DeFi lending protocol.


Some Ethereum users were concerned that ETH withdrawals could be delayed for a long time after the merge. As a result, many Lido users withdrew their ETH from Lido, leaving Lido with insufficient liquidity to meet Celsius' withdrawal requests at a 1:1 ratio. As a result, Celsius stopped withdrawing customer funds on its own platform. This caused a chain reaction in the crypto ecosystem. The Celsius bankruptcy triggered one of the biggest sell-offs in the crypto market this year.


When can stakers withdraw their Ethereum?

Ethereum developers launched the Beacon Chain back in 2022 to give potential stakers enough time to lock their ETH and thus become validators. Since the merge, these validators have secured the decentralized network. According to the Ethereum Foundation, there are currently over 15 million ETH staking on the Beacon Chain. In addition, the number of validators is almost half a million.

Ethereum developers are currently working on the development of the Shangdong testnet . The testnet will allow stakers to test withdrawals of their ETH before the Shanghai hard fork.


DISCLAIMER

All information contained on our website has been researched to the best of our knowledge and belief. The journalistic contributions are for general information purposes only. Any action taken by the reader based on the information found on our website is entirely at their own risk.

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