This stETH Pool Completely Drained Trapped Investors


Large institutional investors such as Alameda Research and Three Arrows Capital used a trading pool to dump their “stETH” tokens, but the pool is now completely depleted and wildly out of balance, potentially trapping retail investors as well as the struggling crypto lender. Celsius.

However, the so-called Curve liquidity pool, which investors used to sell their stETH, is quickly depleting, a dynamic that could force future sellers to turn to less transparent OTC markets, where discounts could be even more important.

On Curve, the pool in question allows investors to convert stETH to ETH. Total value locked (TVL) — a standard metric for measuring the scale of these protocols in decentralized finance — fell to $621 million from $4.6 billion since early May, according to statistics. It is also very unbalanced, with around five times more stETH than ether, which makes large-scale token trading expensive or difficult.

Until the implosion of the Terra blockchain last month, stETH and ether were traded at a 1:1 ratio. But then there was a 2-3% price difference. Following financial difficulties at crypto lender Celsius and hedge firm Three Arrows Capital, both major stETH holders, the spread widened to 5-6% in early June.

Big players dropped stETH through the curve

Some large stETH holders sold it for ETH, largely through the Curve pool. According to Kaiko, the stETH-ETH curve pool accounted for 98.5% of all stETH decentralized exchange volumes in recent months, while centralized exchanges were negligible.

According to Kaiko’s post, Amber, a crypto investment platform, received $160 million in just a few days in early June. stETH was sold for $88 million by Alameda Research, a digital asset trading firm. In May, Three Arrows Capital, a hedge fund facing insolvency, bought back around 400,000 ETH and stETH tokens from the protocol.

Average investors now trapped

Celsius, a major crypto lender that has come under fire for halting withdrawals due to “extreme market conditions,” could be stuck with its stETH holdings. According to Ape Boarda wallet tracker from blockchain intelligence firm Nansen, Celsius still owns at least 409,000 stETH, worth around $413 million at current rates.

Average investors with stETH may have even fewer options, as they are often unable to trade on OTC exchanges. According to Kaiko’s research, centralized exchanges lack a sufficient market for sellers of the stETH-ETH trading pair.

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