Analysts urged not to compare the stETH discount and the collapse of Terra

Analysts urged not to compare the stETH discount and the collapse of Terra

Analysts urged not to compare the discount of stETH and the collapse of Terra

Decoupling “staking ether” in Lido Finance is different from the situation with the loss of Terra USD parity with the US dollar. These are the conclusions of CoinShares analysts.

Experts noted that stETH does not need to maintain a 1:1 ratio to ETH in order to work correctly. Staking-locked coins continue to secure the network, while the Ethereum derivative can be transferred to various DeFi projects in order to generate additional income.

What is Lido?

Specialists have predicted that the discount will remain until the possibility of withdrawing ETH from the deposit contract appears. They explained the persistence of the observed discrepancy by the “lack of arbitrage opportunities” to eliminate it.

CoinShares noted community concerns about the growing dominance of Lido Finance among Staking-as-a-Service (SaaS) platforms. The share of the project reached 31.9% of the total 12.92 million ETH ($14.69 billion).

Specialists pointed out problems with the liquidity of some market makers, since the possibility of withdrawing ETH in Beacon Chain will appear only some time after merge (The Merge). This led to sales of stETH.

Referring to on-chain data, the specialists emphasized that industry participants such as Celsius Network have enough assets to meet obligations. However, “given the opacity of centralized institutions, this is not a guarantee,” they added.

For long-term investors whose profits and losses are denominated in ETH, the resulting discount created a buying opportunity, while for financially oriented speculators the result in US dollars will probably need to close their positions. In turn, arbitrageurs now have the option of opening a long position on stETH and a short position on ETH.

CoinShares is convinced that the transition of the Ropsten testnet to PoS, which took place on June 8, gave confidence to those who expect the discrepancy between the two assets to disappear in the future.

Specialists did not rule out that the loss of stETH parity with ETH will strengthen the call for regulation of crypto lending platforms.

Recall that the innovative hub of the Bank for International Settlements will develop a platform to assess the risks associated with stablecoins and crypto lending projects for financial stability.

How the Celsius, 3AC and stETH issues will affect the price of Ethereum and the cryptocurrency market

Recently, ForkLog reported that the TVL of the largest liquidity pool for stETH dropped by seven times in a month and a half. Earlier, Lido Finance stated that the service was operating as usual , despite the sale of the asset by large holders and the discount on stETH.

Read ForkLog bitcoin news in our Telegram — cryptocurrency news, rates and analytics.