stETH is supposed to be pegged with ETH price currently it’s currently trading at 0.94.
“stEth is a staked $ETH in Lido protocol ($LDO) for which you get stETH equal to $ETH. This system also has a possibility of peg/depeg. Now stEth=Eth, but if the depeg happens and stEth becomes cheaper than Eth, the situation will go out of control.”
It’s already happening. There is a 4-5% discount for sETH that is supposed to be “secured by ether” in one-to-one ratio. Panic in the secondary market
closed its position and got rid of nearly 50,000 stETH in a matter of hours.
CelsiusNetwork liquidity is decreasing. There is fewer and fewer funds available to pay back investors who are buying out positions. They have $1.5b of requests https://twitter.com/highrisk_henny/status/1535268210986995713?s=21&t=jF_SMcO2VRcuybDXkARdLA… This “game” has all the big players involved from
Also, the lack of liquidity arose thanks to several hacks: The first hack happened in May 2021, where 35,000 ETH was lost – worth $70 million. The second loss was on December 1, 2021, after the BadgerDao exploit, where he stored his 896 BTC, worth $54 million Celsius.
On top of that, Celsius had a $LUNA/$UST deposit, at Anchor, for $500 million. The total loss was $624 million and, importantly, it was client money for which Celsius was responsible.
Also, the lack of liquidity arose thanks to several hacks: The first hack happened in May 2021, where 35,000 ETH was lost – worth $70 million. The second loss is on December 1, 2021, after the BadgerDao exploit, where he stored his 896 BTC – worth $54 million Celsius.
After all these losses and hacks, the battered Celsius turns on the HODL mode for its users, thereby delaying the withdrawal of deposits, since now the project does not have enough liquidity to pay off everyone.
To solve its liquidity problem, Celsius went into debt in May 2022, borrowing $76.7 million in $USDC and $18.3 million in Compound to pay back its clients. However, he realized that there would not be enough money to pay everyone, and now, presumably
He can choose two scenarios for the development of events: Option 1 is to sell your stETH for ETH and exchange ETH for stables. Option 2 – use stETH as collateral for stables.
If we assume the implementation of the 1st option, then there will not be enough liquidity in the Curve pool at the moment to exchange all stETH for ETH, since the pool is getting more and more depleted with each sale.
But let’s not forget that Celsius already has $1.2 billion in debt to AVVE, along with $2.5 billion of $stETH collateral. And, if market conditions suddenly deteriorate and stETH collapses then the $2.5 billion collateral will be liquidated, putting Celsius in an even riskier position to lose everything.