The de-peg led to liquidations throughout DeFi protocols Gearbox and Morpho Labs.
The Ethereum re-staking token issued by Renzo, the second-largest restaking protocol by property, misplaced its peg to ETH, inflicting liquidations throughout at the least two decentralized finance (DeFi) platforms.
Renzo’s ezETH dropped to as little as $700 in early Wednesday EST, earlier than shortly bouncing again to $3,200. The token has been edging decrease and presently trades for $3,196, whereas ETH trades at $3,204, as of 11am EST.
The de-peg adopted the top of the primary section of Renzo’s airdrop.
The transfer highlights dangers related to the nascent liquid restaking sector.
Restaking refers to customers taking tokens that characterize ETH that’s been staked within the Ethereum mainnet, and utilizing these tokens to safe the networks of functions constructed on prime of restaking protocol EigenLayer, in the hunt for further yield.
Renzo Protocol is the second-largest liquid re-staking protocol, holding $3.3 billion in whole worth locked (TVL) in response to DefiLlama. Liquid re-staking protocols concern tokens that characterize ETH staked in EigenLayer.
Put up-Airdrop Dump
Based on the pseudonymous crypto investor Tommy, the sell-off and subsequent de-pegging was brought on by customers withdrawing their staked ETH from Renzo, and transferring it to different protocols.
“Promote-off probably brought on by the conclusion of Season 1 Airdrop, customers wish to get again ETH to farm different LRT/protocols,” he wrote.
Renzo Protocol had attracted consideration after its newly launched token, REZ, was added to Binance launch pool on April 23, the identical day the protocol introduced its incoming airdrop.
Renzo allotted 10% of $REZ for its airdrop, with 5% allotted throughout its Season 1.
Cascading Liquidations
The sell-off led to liquidations throughout a number of protocols, reminiscent of Gearbox and Morpho Blue.
Based on 0xmikko.eth, 115 credit score accounts on Gearbox Protocol have been affected, equal to 10,650 ETH, or $32 million. These received bought on Balancer’s pool triggering the mass liquidations.
The pseudonymous Tommy additionally indicated that “loopers” (customers who use liquid restaking tokens as collateral to borrow ETH and create leverage) suffered a big portion of at present’s losses.
