O, humans, resist your predilection to speculate

The sETH token, which is supposed to trade at a 1:1 peg to ETH [Ethereum crypto], is currently trading at $1,513.14 and has fallen 10% in the past 24 hours. By comparison, ETH is trading at $1,582.

stETH has been depegging since late-Thursday, with the first wave of losses stemming from a massive $1.5 billion dump by Alameda Capital– one of the largest holders of stETH. Alameda sold all of its holdings of the token.

stETH does not have a direct link to ETH prices. It can be redeemed for ETH only after the merge becomes effective- the date of which is currently unknown.

But the token’s main role as collateral on DeFi platforms such as AAVE and Lido could have dire implications for DeFi. Sharp losses in stETH are also causing panic selling in Ethereum.

Celsius, Lido could be caught in the crossfire

But even while stETH has minimal impact on ETH prices, its key role in leveraging with ETH on DeFi could burn those with high exposure.

Currently, DeFi platform Celsius has locked a lot of customer funds into stETH, which are liable to redemptions. If customers were to be spooked by the current stETH downturn, it could cause a bank run that would overload Celsius with redemptions, potentially causing a liquidity crisis.

DeFi majors AAVE and Lido, which have large holdings of the token, could also see a liquidity crunch if stETH selling intensifies.

https://mishtalk.com/economics/fundamentally-and-technically-the-entire-crypto-space-is-a-huge-mess