Original link: https://www.hellobtc.com/kp/du/06/3960.html
Author: Five Fireball Leader / Source: Vernacular Blockchain
Author | Five Fireball Leaders
Produced | Vernacular Blockchain (ID: helloBTC)
In the past two days, stETH has become popular again. The psychological shadow brought by the Luna de-anchoring incident last month still seems to linger in the hearts of every participant. By the way, the price of ETH has also been pulled down by this emotion.
Should you worry about this? If you hold ETH in your hands, there are indeed some things you should worry about, but also, you don’t need to worry about liquidity draining or crashing like Luna, after all, although it is Curve The liquidity crisis of the pool, but stETH and Luna-UST are not the same thing at all, and they cannot even be compared together, so there is no need to worry too much.
So this article mainly talks about what to worry about and what not to worry about!
01
what is stETH
To be worried, first of all at least you need to know what is this thing you are worried about?
stETH, in fact, is ETH, but it is only ETH that participates in ETH2.0 pledge through Lido. stETH is equivalent to a mortgage proof. Because these pledged ETHs cannot be redeemed within 6 months (in other words, before February and March next year) after the 2.0 Merge is successful (with a high probability of August-September this year), so Curve has stETH-ETH The pool helps alleviate the liquidity problems of these “locked” ETHs.
Similar to the bETH of major CEXs, if your ETH is pledged through CEX 2.0, then CEX will give you a bETH pledge certificate, and also provide bETH/ETH trading pair to release liquidity in advance.
How big is the amount of stETH? It is very large, because there are currently more than 12 million ETHs participating in 2.0 pledge, and Lido himself accounts for 32%, which is almost 4 million!
How should stETH or bETH be priced under normal circumstances?
You will find that most of the time, it is basically concentrated in the state of 1:1 with ETH, or the price of about 0.97-1.
Why?
Because it is very simple, every stETH or bETH has a real ETH behind it, and it can be redeemed into real ETH 6 months after the 2.0 merger, so it is similar to USDC endorsed by US dollars, but there are a few more month of redemption.
Therefore, compared with ETH itself, stETH has obvious advantages and disadvantages.
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Advantage
1 – You can get about 4% of the ETH2.0 pledge reward;
2 – Because AAVE accepts stETH as collateral (up to 73% of LTV – Loan to Value: loan-to-value ratio, loan-to-value ratio refers to the ratio of loan amount and collateral value ), so you can go to AAVE to recycle and borrow, and deposit one ETH into Lido Take a steth, throw it into the AAVE mortgage to get 0.7 ETH, then deposit the 0.7 ETH in Lido to get 0.7 stETH, throw the AAVE mortgage and get 0.49 ETH, and the cycle goes back and forth… After a few tossing, almost one ETH can be used. It becomes 2-3 stETH and eats about 10% of the ETH2.0 pledge reward.
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disadvantage
1 – stETH will not be able to redeem ETH until February and March next year, which has the disadvantage of liquidity and usability compared to ETH (after all, you can’t use stETH to buy small pictures from Opensea or go to Uniswap to buy cottages);
2 – What if The Merge is delayed again, or even fails? Or there is a black swan event in Lido’s contract. Although it is a small probability event, it does not mean that it is completely impossible.
In fact, the main question is whether the stETH:ETH ratio of about 0.95-1 is a reasonable price compared with the pros and cons .
Judging from GBTC’s negative liquidity premium of about 20% that year, stETH is likely to be relatively “overvalued”~
02
Fuse – Celsius Blast
Celsius is a CeFi wealth management platform in the United States. For example, users deposit ETH, giving you an annualization similar to bank deposits. But it exploded recently.
The reason is that the 2.0 pledge platform StakeHold he used had tens of thousands of ETH stolen a year ago, and it was only revealed recently, and it was hidden and tucked before. In addition, they lost tens of millions of dollars in the theft of their BadgerDao in December last year, and the UST crash lost another 500 million dollars… Many users couldn’t sit still and ran to Celsius to withdraw money.
The embarrassing thing is that a lot of ETH in Celsius has gone to pledge 2.0, so in order to meet the withdrawal needs of users, it has to sell a large number of stETH to ETH to meet the redemption of users, and in the Luna explosion last month, the original Some institutions sold a lot of stETH to try to save the UST at that time, and the stETH-ETH pool on Curve seemed to be crumbling under this double blow.
And this is not over yet. Originally, this pool of Curve was supported by several large institutions. In recent days, institutions headed by Alameda have also begun to sell or withdraw liquidity. One hit is tens of thousands of ETHs. , the ratio of stETH to ETH has dropped directly to about 0.95.
03
Things you should worry about:
The short-term de-pegging of stETH and the rapid decline of ETH
Although the form looks serious, it is completely different from the rootless tree of UST . Of course, the following events may occur in the short term:
In theory, if an institution wants to pick up bloody chips for stETH, it can do this:
1. Mobilize a large amount of stETH in a short period of time to quickly sell, and do not give people the opportunity to buy the bottom (ETH with a 8-10% discount, but it is more attractive to cash out later for many institutions and retail investors), put stETH: The ratio of ETH drops directly below 0.85, and then triggers the liquidation of AAVE (mainly refers to the position of depositing stETH and borrowing ETH, the current liquidation price is around 0.85);
2. Directly sell ETH , because the borrowing of stETH on AAVE is not all about depositing stETH and borrowing ETH for revolving loans, and a considerable part is the traditional style – mortgage stETH to borrow stablecoins. Therefore, when the price of ETH falls too much, the part of the position where ETH or stETH is mortgaged and borrowed from stable coins will be liquidated, and stETH cannot be directly liquidated into stable coins in the market, but can only be sold for ETH, which is equivalent to smashing in disguise stETH: ETH trading pair.
Institutions pick up 20% off, 30% off, or even greater discounts on ETH (depending on the degree of stETH de-anchoring).
Therefore, in the short term, the severe de-anchoring of stETH and the rapid decline of ETH are possible.
04
Things you shouldn’t worry about:
Long-term de-anchoring of stETH
As long as you really understand the operating mechanism behind stETH, then you will definitely not worry about the long-term serious de-pegging of stETH . Even taking into account the contract risk of Lido and the possibility of the extension or even failure of the 2.0 merger, it is difficult for the long-term negative premium of stETH to exceed the range of 5%-10%. After all, almost all the smart money in this market is staring at stETH.
I believe that once there is a short-term serious de-anchoring phenomenon, many people will flock to the discounted ETH like a shark smells blood. Let’s assume that ETH is dropped to $1,000, and the stETH exchange rate is dropped to $0.7,700 to buy a “real” ETH that can be exchanged in 8 or 9 months. Dare you say that you are not interested? Chizi was quickly pulled back to the normal range by smart money…so in the long run, there’s really nothing to worry about
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