Thread by @hasufl

stETH is trading at 0.98 ETH rn, what does that mean?

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💭First, what actually is stETH?

1 stETH is a claim on 1 staked ETH on the Ethereum Beacon chain.

You can redeem it after withdrawals from the BC are enabled, which is planned for EOY 2022.

This is the primary stETH market.

💭Who is unaffected by stETH secondary market price? (hint: almost everyone)

So, stETH is a claim on 1 ETH in the primary market, but these claims can be traded as well.

These are the secondary stETH markets.

(btw, that's why we call stETH a staking "derivative")

💭Who is unaffected by stETH secondary market price? (hint: almost everyone)

The price of stETH in secondary markets has no effect on its value in the primary market.

As a longer-term staker of ETH, you can always redeem 1 stETH for 1 ETH in the future.

💭Who *is* affected by stETH secondary market price?

For one, anyone looking to sell their stETH before the primary market opens.

‼️ But primarily, anyone who uses their stETH as collateral to get leverage (e.g. to stake more ETH and juice their returns)

💭 Note for leveraged stakers

Depending on the size of your leverage, a falling stETH price in secondary markets can reduce the value of your principal (stETH) compared to the value of your loan (ETH).

If this ratio (called LTV) falls enough, you are at risk of liquidation.

💭 Don't become a forced seller into an already falling market.

If you use leverage:

1) Use safe LTV ratio that can withstand big market swings!
2) Always monitor your current LTV ratio and react accordingly!
3) Use auto-deleveraging tools like @DeFiSaver!

💭 Finally, what is a risk to some people can be a big opportunity for everyone else.

Anyone can buy stETH at a discount, e.g. 0.98 ETH, and redeem it for 1.00 ETH once withdrawals are available. Risk-free.

This is on top of staking rewards, LDO incentives, and soon fees+MEV.

You can buy stETH here: curve.fi/steth