ETH Peg Is Breaking

ETH has been a complete shitshow for ages now, first they fucked up their DAO fund and had to fork into ETH and ETH classic. Eth heads used to complain about Bitcoin fees being too high, and bitcoin did something about it, launching Segwit and the Lightning network.

What did ETH do? Roll out sweet blue fuckall, lol and the gas fees have been blowing through the roof while other companies look to profit from the failure with all these "bridges" and "side-chains" that aren't really connected to Eth.

ETH with its turing complete system allows you to submit changes to a smart contract and pay fees for it, but smart contracts don't account for failure in cost calculations and up to 1.2 million ETH transactions fail every month.

Then there's theirs the MEV situation, which I've spoken about in the past, the unspoken tax on shitcoiners using the chain, but no one wants to talk about.

In the lastest line in ETHs increasingly long list of fails is the delay in the move to proof of stake, ETH 2 has been in the works for years and the transition has been well cock up after cock up to say the least.

Bi-Eth-ual

As ETH aims to move from the proof of work chain to the proof of stake chain there are now two chains available, the old one that miners support and the new one that validators support known as the beacon chain. To be a validator you need to stake 32 ETH or be part of a staking pool.

Those who want to participate in these staking pools need to lock ETH on the beacon chain, but once that's done you cannot unlock that ETH again.

It's just sitting there accumulating staking rewards until the merge is complete.

What is stETH?

In the meantime staking pools have come up with an alternative known as Lido staking ETH or stETH.

stETH is a derivative token backed 1:1 by ETH. Users who stake their ETH on the Lido Finance platform receive the staked derivative in return.

So you can stake your ETH, get stEtH and still use it however you like, such as DEFI and all that other shit you do with ETH. Once the merge happens you can trade what's left of your stETH for the new ETH.

Like anything ETH it all sounds good in theory and then in real life, it all goes to shit.

The peg is showing signs of weakness

So now that stETH is tradable, token holders are able to sell their stETH for ETH on the open market, but there has always been a slight discount, reflecting the level of risk that comes with holding a derivative rather than the actual asset itself.

You can see over its lifespan stETH traders in a 2% discount range with brief moments of overvaluation, arb traders will come in to try and profit off of that, but apart from one blip it's been rather steady until now.

Over the last month, this discount has deepened considerably to as low as 6%, and this de-pegging shows very little sign of recovery. Considering all the blow-ups in the shitcoin market of late and the fact that interest rates are pulling capital out of risk assets, it's only a select few who have the will or luxury to sit and wait for the ETH merge.

The rest want to GTFO out of this trade and wait to see what happens.

The stETH pool is not only retail investors but exchanges and large players who wanted to lock up their ETH to pocket that sweet sweet staking rewards while having their cake and buttering it on both sides by still trading stETH in the open market.

As liquidity drains from the market, and users want to pull their funds from these services, you're seeing a lot of forced selling and it doesn't look good for stETH.

Now some will say there are plenty of believers happy to pick up a 6% discount and then swap that for real ETH when the price recovers or hold it to the merge, but that remains to be seen, if that discount is attractive enough or will traders let it crater before they pick it up.

Personally, I'd love if this is their LUNA moment and takes this whole shitpile with it lol, but there is way too much investment in ETH for people to let it go down the tubes just yet.

Have your say

What do you good people of HIVE think?

So have at it my Jessies! If you don't have something to comment, "I am a Jessie."

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