The amount of ETH waiting to withdraw from the Ethereum network reaching a record high may create strong downward price pressure in the market.
The increase in unstaked ETH means increased selling pressure, negatively impacting price and posing liquidation risks for assets on related DeFi protocols.
MAIN CONTENT
Hundreds of thousands of ETH are in the withdrawal queue from the Ethereum network, creating selling pressure in the market.
The depreciation of stETH reduces the value of collateral assets, triggering stop-loss mechanisms and liquidations.
Leveraged trading related to stETH is no longer profitable, prompting traders to sell ETH en masse.
Why is the validator queue for withdrawing ETH at a record high?
As of August 17, the amount of ETH in the withdrawal queue from the Ethereum network reached 855,158 ETH, breaking all previous records according to data from Decrypt. This is the amount of ETH being prepared by validators to withdraw from the staking mechanism.
Juan Leon, senior investment strategist at Bitwise, stated that this phenomenon is largely due to investors' tendency to reduce ETH staking to prepare to exit the market or reallocate assets, while also reflecting cautious sentiment due to recent price volatility.
How does the ETH withdrawal queue affect the price of ETH?
The increase in ETH waiting to unstake often creates strong selling pressure on the price of this asset. When investors withdraw ETH from staking, the amount sold in the market increases, reducing demand and pushing the price down.
Moreover, stETH tokens – tokens representing ETH staking – are often traded at a discount, reducing the value of collateral assets, increasing liquidation risks for borrowing positions in the DeFi market, thereby increasing selling pressure.
The amount of ETH in the withdrawal queue could lead to a sell-off in the market, especially as the price of stETH decreases, indicating a loss of value for the collateral asset.
Juan Leon – Senior Investment Strategist, Bitwise, 2024
What is the impact of the stETH leveraged trading cycle on the ETH market?
The leveraged trading cycle around stETH, conducted through liquidity pools of DeFi protocols, is no longer profitable. This leads traders to close positions by selling ETH to pay off debts, creating synchronized selling pressure in the market.
This phenomenon contributes to increased liquidity for borrowing positions and drives the asset liquidation process, potentially subjecting the ETH market to prolonged downward price pressure.
How does the stETH discount mechanism affect collateral asset risk?
stETH is known as the token representing ETH in a staking state, but when traded at a discount, the value of the corresponding collateral asset also decreases.
A decrease in collateral asset value increases the risk of margin calls and liquidations, causing loans to be due or liquidated early, leading to a cascade of ETH sell-offs in the spot market.
Frequently asked questions
What is the ETH withdrawal queue and why is it important?
This is the amount of ETH being prepared for withdrawal from staking through validators, reflecting cash flow out, which directly affects supply and demand balance and ETH price.
How does the stETH discount affect the market?
When stETH decreases in price compared to ETH, the value of collateral assets decreases, increasing liquidation risk and selling pressure in the DeFi market.
What will happen to unprofitable stETH leveraged trading?
Traders will close positions by selling ETH to pay off debts, increasing selling pressure and pushing the price of ETH down.
When might the selling pressure of ETH ease?
Selling pressure will decrease if the amount of ETH in the withdrawal queue decreases and DeFi ecosystems stabilize collateral asset values.
Will the selling pressure have a lasting impact on ETH price?
The pressure may persist if there are no signs of reduced unstaking and asset liquidations, but it also depends on overall market factors.
Source: https://tintucbitcoin.com/eth-unstake-vuot-tao-ap-luc-ban/
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