Cryptopter collapses have caused the largest pool of stETH liquidity to dry up and difficult for users to sell

The largest liquidity pool of the synthetic token stETH on the decentralized exchange (DEX) Curve dries up quickly. This means that the pool has almost no liquidity.

Due to the loss of liquidity, it is difficult for investors to sell their tokens. Those who have not been able to sell before will have to resort to over-the-counter (OTC) markets. However, retail investors do not have access to OTC, which does not allow them to exchange their tokens. Disposals can therefore cause even steeper losses.

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Loss of liquidity and TVL

The Curve stETH pool allows investors to exchange tokens for ETH. Since the beginning of May, total locked value (TVL) has fallen from $ 4.6 billion to $ 621 million. This means that the pool lost more than 92 % of its liquidity in just over a month.

But the problem is not only the loss of TVL, the pool is also unbalanced. It currently holds five times more stETH than ETH. Therefore, those who want to exchange their tokens cannot find enough ETH to perform the operation.

According to CoinMarketCap has one stETH value around 0.93 ETH. This means that the token has already lost 7 %s of its parity since May 20.

"I'm sorry for the small investors, because the Curve pool was the only way out," said Vance Spencer, co-founder of Venture Capital Frameworks.

stETH "discount"

Discount on stETH is a field of analysts a clear sign of the liquidity crisis in cryptocurrencies. In times of high inflation and aggressive interest rate hikes, investors prefer to hold liquid assets that can be easily sold. In this sense, BTC and ETH are the preferences of those who invest in cryptocurrencies.

The problem is that it is a synthetic token that theoretically represents ETH in the Beacon Chain. And this token is bound to ETHs, which are locked in the network. However, this blocking time ends after the blockchain successfully completes The Merge update. And according to the latest estimates, the implementation of The Merge could take until August.

However, many were forced by market developments and began to liquidate their positions, reducing token parity.

Until the collapse of Terra, each stETH was worth exactly one ETH, almost like stablecoin. But then the token dropped the parity of 2% to 3% against the ETH price. When the Celsius platform stopped making selections, the difference reached 6 %. And now, with the problems of the 3AC fund - another large stETH holder - it's 7 %.

The pool holds approximately 111,000 ETH and 492,000 stETH, indicating that most investors want to sell stETH.

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All content in this article is for informational purposes only and does not in any way serve as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.