By Ethereum (ETH) 1: Blockchain data analysis platform Nansen released an analysis report on 29th, saying that the UST decoupling and the subsequent collapse of Terra ecosystem spread effect, while Three Dart Capital, Celsius and other institutions are aggravating stETH decoupling is both catalyst and victim.
Nansen, a blockchain data analysis platform, released a report on The 29th, suggesting that the contagion effects from UST decoupling and subsequent Terra ecosystem collapse may be the main factor in stETH decoupling, pointing out that although the discussion about stETH decoupling has been the most heated recently, the factors that laid the foundation for the current situation, It was laid about a month ago during the UST collapse.
When UST is still stable at $1, a popular investment strategy is to use a cross-chain bridge Wormhole to transfer stETH to the Terra blockchain, while the derivative token bETH represents stETH on the Terra chain, Nansen notes. BETH can deposit with Anchor Protocol to lend to UST.
This investment strategy worked well until the UST price began to de-link, but as investor confidence in Terra fell Anchor users began to scramble to pull their tokens off the platform, and since then they have linked the bETH bridge based on the Terra chain back to Ethereum to convert back to stETH.
BETH assets at Wormhole fell 95 per cent from a peak of 667,000 to 32,000 in four days from May 7, while stETH at Anchor Vault plunged 96 per cent from 665,000 to 26,000, Mr Nansen noted.
This is because bETH holders are eager to redeem stETH and switch to ETH, which puts significant downward pressure on stETH prices, Nansen says, noting that net stETH buy/sell data during the period indicate cumulative net sales of more than 169,000 stETH on decentralized exchanges (mainly Curve). This led to a liquidity collapse in Curve pool.
Celsius, three arrow capital into stETH decoupling catalyst
Celsius and Sanarrow Capital may have had the biggest impact by withdrawing liquidity from Curve's stETH/ETH pool on May 12, Nansen said. Sanjian Capital withdrew $400 million worth of liquidity (128,000 stETH and 7,300 ETH) while Celsius withdrew $380 million worth of liquidity in three transactions on the same day.
While Celsius and Sandart may have been one of the main catalysts for stETH's decoupling, Nansen said Celsius and Sandart also suffered significant losses as stETH continued to discount prices, especially as the broader cryptocurrency market crashed in early June.
"Three Arrow capital is a victim of the contagion effect of the Terra ecosystem collapse," Nansen said. "Its lack of sound risk management, coupled with its high leverage, is a time bomb that detonated due to the Decoupling of stETH, and it wasn't until the 13th and 14th that Sanarrow Capital began to unwind its stETH position for Ethereum and Stabecoin." Reduce its risk and reduce losses.
In response to the stETH decoupling, Nansen concludes: Given the poor market conditions that followed Terra's crash, the imbalance in the stETH pool, the failure of liquidity on Curve to recover, and the drying up of liquidity meant there was no other way for a large number of stETH holders, such as Celsius, to cover positions, resulting in the widely reported decoupling event that took place between June 11 and 13.