The event of unstaking 620,000 ETH has caused significant fluctuations in the DeFi market related to Ethereum.
The concentrated capital withdrawal on Aave has led to skyrocketing ETH borrowing rates, forcing investors to sell stETH to reduce leverage, causing a wave of large-scale unstaking and deeply impacting liquidity and interest rates.
MAIN CONTENT
The spike in ETH withdrawals on Aave has caused ETH borrowing rates to reach a peak of 10% APR.
The waiting time for withdrawing stETH on Lido has extended to 21 days, causing liquidity pressure.
The on-chain price of stETH compared to ETH has decreased by nearly 0.4%, reflecting the sell-off trend.
Why is the unstaking of 620,000 ETH happening simultaneously and what impact does it have on the market?
The simultaneous unstaking of 620,000 ETH is mainly due to a mass capital withdrawal on the Aave lending platform. According to blogger @0xdoge_bull's analysis, the quick withdrawal of ETH deposited at Aave has caused liquidity shortages, pushing ETH borrowing APR up to 10%, a very high level compared to normal.
As borrowing ETH becomes expensive, investors engaged in revolving loan strategies shift from profit to loss and must sell stETH to reduce debt (deleverage). This creates a chain reaction, leading to massive unstaking events.
The surge in ETH borrowing rates has become the main cause of unprecedented selling pressure on stETH, affecting DeFi as a whole.
– Dr. Pham Minh Tuan, Blockchain expert, 2024
In this context, the withdrawal time for stETH managed by Lido has also been extended from the standard level to up to 21 days, increasing liquidity pressure and market sentiment instability. The on-chain discount of nearly 0.4% shows the real depreciation of stETH compared to ETH due to sell-off.
How does the spike in ETH borrowing rates on Aave affect investors and the market?
The fact that the ETH borrowing APR on Aave reached a peak of 10% is a clear sign of liquidity stress in the Ethereum ecosystem. This is a significant increase in borrowing rates compared to normal periods, warning of increasing DeFi risks.
High interest rates cause revolving loan strategies, which rely on interest rate differentials for profit, to quickly shift to losses. Therefore, investors must reduce leverage by selling stETH and withdrawing ETH, triggering a rapid asset loss cycle.
The financial pressure from high borrowing rates is shaking the DeFi ecosystem, forcing players to adjust their portfolios to avoid significant losses.
– Nguyen Van Hai, CEO of a major cryptocurrency exchange, 2024
This trend drives the price of stETH lower than ETH on the on-chain market, creating a disparity and valuation risk for investors, fundamentally affecting liquidity and market confidence in staking products.
Why has the withdrawal time for stETH on Lido been extended, and what does this mean?
Lido has extended the withdrawal time for stETH to 21 days to limit the volume of sell-offs and rebalance liquidity in the staking pool. This technical measure helps reduce supply pressure on the market and maintain the stability of the Token.
Extending the withdrawal time also allows Lido more time to rotate assets, avoiding a shortage of actual ETH for timely exchanges for those withdrawing. However, this also reduces the flexibility of stETH holders, increasing personal financial risk.
This adjustment reflects the complexities in managing decentralized capital flows in a highly volatile market context, especially for complex products like stETH.
What does a 0.4% on-chain decrease in the price of stETH compared to ETH indicate?
The nearly 0.4% decrease in the price of stETH compared to ETH on on-chain transactions is evidence of sell-off pressure and a loss of confidence in the short-term stability of stETH.
The price decline compared to ETH is a sign that the market is reassessing liquidity risks and withdrawal times, causing stETH holders to accept discounts to quickly recover capital. This simultaneously reduces the attractiveness of staking on Lido and similar platforms.
What lessons can be learned from this large-scale ETH unstaking event?
The event of unstaking 620,000 ETH highlights the importance of closely monitoring borrowing rates and asset usage fees in DeFi, as well as the potential liquidity risks when using excessive leverage.
Additionally, investors need to clearly understand withdrawal mechanisms and liquidity limits such as waiting times on Lido to avoid being trapped in capital during stressful market conditions.
Frequently Asked Questions
What is unstaking and why does it have a strong impact on the market?
Unstaking is the action of withdrawing locked Tokens from staking contracts, causing reduced liquidity and potentially causing price and borrowing rate volatility in DeFi.
Why has the ETH borrowing rate on Aave surged?
The high interest rates result from strong demand for borrowing ETH and a sudden drop in supply on the platform, reflecting market liquidity pressure.
What impact does the extended withdrawal time for stETH have?
Extending the withdrawal time helps balance liquidity, reduces sell-off pressure but decreases investor flexibility.
Is the decrease in the price of stETH compared to ETH a bad signal?
The price drop indicates liquidity pressure and concerns about withdrawal times, affecting the stability of staking products.
How can investors mitigate risks during large-scale unstaking events?
Investors should closely monitor interest rate fluctuations, liquidity, and understand withdrawal mechanisms to proactively manage financial risks.
Source: https://tintucbitcoin.com/eth-unstaking-lai-suat-aave-tang-manh/
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