Researching several topics today for our new episode of @MarketCapping and one is sticking out to me as a major concern.
$stETH / $ETH peg is in rough shape and running out of liquidity fast.
Compiling my thoughts to get more eyes on this... 🧵
@MarketCapping $stETH is a staked version of $ETH from @LidoFinance that is meant to secure $ETH post-merge.
$stETH is fully backed 1:1 by $ETH it's just very illiquid until the merge in a few months. This has never been an issue because there was a Curve.Fi pool for liquidity
@MarketCapping@LidoFinance The Curve.Fi pool has become very heavily imbalanced with nearly 75% of the pool now made up of $stETH. The highest the imbalance has ever been...
This results in $stETH being about 3% under the peg and sliding further away.
@MarketCapping@LidoFinance The pace of the de-pegging is determined by the imbalance of assets in the LP and A Factor.
Not familiar with A Factor? Here is a quick post by @Tetranode explaining how it works. The $stETH pool is at critical levels and the depeg will likely accelerate.
@MarketCapping@LidoFinance@Tetranode With $stETH being backed 1:1 and the merge being only months away it seems like a no-brainer to buy the arbitrage opportunity and hold the $stETH.
This is much different than $UST which didn't have a backing so why are people exiting?
@MarketCapping@LidoFinance@Tetranode The canary in the coalmine for me was @AlamedaResearch exiting their position yesterday. Unloading nearly 50k $stETH over a matter of hours and suffering massive slippage to exit...
1 . Sell their $stETH for $ETH and then stable coin in order to become more liquid. 2. Use the $stETH as collateral and take out loans to repay customers
Their position is around 450k $stETH but looking into the Curve steth/eth LP-only about 242k $ETH of liquidity remains. Every sell, the pool gets further away from being pegged 1:1 which is a loss for them.
@MarketCapping@LidoFinance@Tetranode@AlamedaResearch@CelsiusNetwork@BadgerDAO There is also about $5M of $stETH liquidity on Uniswap and I've been unable to track the size of CEX liquidity. CEX liquidity, UniSwap, Curve, and other sources can't handle them selling their whole position. If CEX's it, they would be selling more volume there instead of onchain
Celsius can get liquidated. Borrowing is getting more expensive, their collateral is losing value due to market conditions, and selling below peg hurts and liquidity is drying up. Negative feedback cycle. Yikes🤢
They only have a few weeks of funds left and are taking heavy losses due to the peg, borrow/lending fees, and also have the risk of the merge being delayed. When do they freeze?
@MarketCapping@LidoFinance@Tetranode@AlamedaResearch@CelsiusNetwork@BadgerDAO@AaveAave Let's not forget, they aren't the only other whale in this scenario. As other whales smell blood, they can force the hand of Celsius and cause them to liquidate other positions while shorting futures markets. Uh oh, so Alameda dumping 50k stETH and moving heavily into stables..
None of this is financial advice and please do your own research. I'm compiling information and sharing findings but am in no way an expert on $stETH, Celsius, Lido, or the other participants involved.
Let me know your thought! GL 📉
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While doing research for a @SCSLabsResearch video, it came to my attention most protocols are mispricing the risk surrounding @circle and the $USDC peg.
Projects and investors both should do some basic risk management exercises regarding $USDC exposure.
Let's discuss 🧵
To start, I have zero positions to profit off of a $USDC depeg and still have $USDC exposure. Similar to @CryptoHayes and @balajis native $BTC is my favorite hedge for USD/USDC risk.
$LUSD, $ETH, $OHM, etc. also help diversify but come with their own set of pros and cons! DYOR
In 2022 projects with treasuries and dev funds that were 100% in either $ETH or on FTX got absolutely rekt.
Please learn from the mistakes of others and diversify your treasuries and dev funds!
I'm extremely excited to announce the launch of our first SCS Labs brand, @SCSLabsResearch!
It will be the first of 3 SCS Labs businesses including a DeFi Research Hub, Project Consulting, and Venture Capital.
Time to finally share the details of what we are building! 🧵
It's almost exactly one year since I went full-time DeFi.
When planning for 2023, I realized how lucky I am to do trade, build a community, and share knowledge full-time. I decided I needed to invest more time into growing the space.
We recognized that there is a massive gap in high-quality Web 3 content and want to fill that gap.
The current content landscape has issues... pick one: 1. Concentrates on majors only (BTC/ETH) 2. Presenter isn't knowledgeable 3. Same projects reviewed 4. Content is poor quality