Thread by @_imavericks

1/
This Lido fiasco has created a mess of everything and for no reason, ETH is suffering, and most importantly users

There are different versions of this story but more or less it's close to what I could analyze

2/
This liquid staking concept i.e, the derived asset itself works as a full-fledged tradeable asset with other utilities like lending, staking, etc.

It's more like the US housing market collapse in the 2000s

3/
Here is one version of the story:

At Lido, stake ETH and get stETH in a 1:1 ratio. Now use that stETH for other purposes

On the other hand, Lido generates money using stETH through lending/borrowing, arbitrage, and other trade opportunities

So far so good

4/
Now Celsius comes into the picture:

It takes ETH from users, stakes in Lido, and gets stETH. Now uses a chunk of stETH as collateral to borrow stable money to invest in a project that is no longer in existence. So, this money is gone!

5/
Panic triggering moment: stETH de-pegs/loses its 1:1 value against ETH

As a user, I don't want to be part of another LUNA-UST crash. So, I start off-loading both ETH and stETH to move my assets to a more stable position to minimize my risk

6/
Being Celsius, I don't have money as a major chunk of it was used to get stable coins for investment which is gone

Now if I sell stETH, I am at a further loss as prices are down plus users withdrawing. So, let's freeze the withdrawals because there is no money

More panic!

7/ Output: More chaos, more panic, and more price downfall

And currently,

stETH is off the track by more than 5%

8/
Balancer and curve both have like 80% in stETH and 20% in ETH

Just to get an idea of how big this has got, just have a look at the ecosystem: lido.fi/lido-ecosystem

9/
A few other things also happened

- stETH was sent to FTX also, most likely to sell

- Alameda Research withdrew 100K ETH from Celsius which created a sense that it might be dumped and before that happens, let's dump our's too

And it went on!

#LIDO #CelsiusNetwork #Crypto