Crypto Fall: Some Industry Platforms Are at Risk – BeinCrypto

Following a whole series of bad coincidences within the crypto sphere, some players in the industry may soon disappear.

stETH: an increasingly fragile part of the crypto sphere

The new drop in value of Bitcoin came like a hair in the soup at the start of the week. As the crypto sphere was already beginning to breathe and come to its senses, everyone realized that the disaster was far from over. Already very weakened by the crash of May, the cryptocurrency economy is also plagued by several scandals. The latest, carried by the freezing of liquidity of the Celsius company, is cause for concern.

Indeed, according to BFM Crypto, Celsius’s issues may affect other platforms in the future. At the origin of the phenomenon, the token lido staked eth, also called stETH. Indexed on Ether, it has been characterized for a month by the loss of its parity with the famous cryptocurrency of Vitalik Buterin.
Since then, all the platforms whose activity is based on this coin, like Celsius, could experience liquidity difficulties. This, as entrepreneur Brad Mills explains, is why the company has suspended all withdrawals.

If customers start withdrawing from Celsius, the company will have to sell its ETH. Celsius has a liability of 1 million ETH. However, among them, 288,000 ETH are inaccessible until the merger of The Merge, 30,000 ETH are lost, 445,000 ETH are in fact stETH and 268,000 ETH are in cash.

Excerpt from a tweet from Brad Mills regarding Celsius Network cash

Source: Brad Mills Twitter account

It goes without saying that if stETH sees its value fall further following a spontaneous fall or an excessive resale of tokens, other platforms whose reserves are mainly made up of this asset could plunge in turn. According to BFM Crypto and analyst Dirty Bubble Mediathe investment company Swissborg could be next on the list since its liquidity reserves would be made up of 80% stETH.

A series of bad coincidences

If the situation occurs rather suddenly, it is the consequence of a real domino effect. Indeed, according to Coinbase, the bad position of stETH is linked to various phenomena that have affected the crypto sphere recently.

Very recently, we have seen a decoupling between liquid Lido stETH and underlying ETH prices, driven by forced margin call liquidations on leveraged positions. This is partly due to poor trading in crypto markets following the TerraUSD (UST) incident. Lido had a version of stETH on Terra called bonded ether (bETH), which could be pledged on Anchor. As a result, releases from Anchor put selling pressure on stETH. A more recent catalyst for the wider spread between stETH and ETH may also have been the reorganization of Ethereum’s Beacon chain (May 25) as well as the failure of Ropsten’s testnet on the same day.

Extract of the blog post from Coinbase regarding the loss of parity of stETH with ether

As for The Merge update, a real event on the Ethereum blockchain, it only makes the situation worse by taking part of the available liquidity hostage. Between fall in value and failures, it would therefore seem that all the elements are in place to plunge the stETH token and its main users.

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Crypto Fall: Some Industry Platforms Are at Risk – BeinCrypto


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