- ETH2.0 staked tokens face extreme sell pressure, as major firms face illiquidity.
- Staked Ether cannot be liquidated until the Ethereum merge occurs
As the Ethereum merge approaches later this year, Lido Staked ETH (CRYPTO: stETH) has suffered severely due to insolvencies across firms, such as Celsius and 3AC.
As the Ethereum merge nears, which shifts Ethereum to proof-of-stake, Lido Finance initiated Staked Ether for investors and traders who had staked Ethereum, on the beacon chain, as a means for liquidity.
Staked Ether cannot be liquidated until the merge occurs. Therefore, Lido-initiated stETH serves as a tradable receipt for the staked Ether as a means of providing liquidity.
CoinDesk revealed that on June 13 the difference between the value of Ethereum and Staked Ether was 8%, which is alarming for investors. Given that major cryptocurrency lending firm Celsius has halted withdrawals, investors on the platform have been unable to access their Staked Ether. Furthermore, Huobi Research Institute revealed that Celsius suffered the loss of $71 million of stETH, as Stakehound lost its keys. Therefore, numerous factors led to Staked Ether trading under the spot price of Ethereum.
Over 400,000 stETH tokens are currently housed by Celsius, thus their potential insolvency creates extreme fear and uncertainty for investors.
Furthermore, in May 2022, Three Arrows Capital (3AC), a major investment firm, also extracted $400 million worth of Staked Ether and Ethereum from Curve protocol. Therefore, the major illiquidity created by the troubles faced by the firms has caused stETH to suffer severely.
As the Ethereum merge nears, staked ETH is likely to continue seeing severe selling pressure as uncertain market conditions resume.