Renzo Crashes On Uniswap: ezETH Depegs Below $700
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Renzo Crashes On Uniswap: ezETH Depegs Below $700
The crashed came shortly after the airdrop farming window was closed.
Renzo’s ezETH experienced a significant drop in value to as low as $750 compared to wrapped ether (WETH). The crash was likely triggered by users reclaiming their ETH in a low liquidity environment and large liquidations of ezETH-collateralized positions.
Renzo is a liquid derivative platform built on the EigenLayer blockchain, one of the largest liquid restaking protocols built on Ethereum. Renzo allows users to restake their ETH for ezETH, which can be used in other decentralized finance applications for extra yield.
According to data from DEXscreener, ezETH crashed to $688 on the Ethereum-based decentralized exchange (DEX) Uniswap at around 2:45 UTC.
ezETH depgged from WETH. Source: DEXscreeneer
Several factors contributed to this crash. First, lower liquidity caused slippage and a price drop on Uniswap, triggering a sell-off likely intensified by liquidations from generalized leverage protocols like Gearbox and lending platforms like Morpho.
Pseudonymous crypto analyst Tommy noted on his X account that the initial price dip was likely compounded by the liquidation of loopers or traders who repeatedly used ezETH as collateral to borrow ETH for leveraging.
Traders Profit From Depeg
Recently, Renzo announced the upcoming airdrop of its native token REZ, scheduled for May 2. The first reward season ends on April 26. Renzo allocated 10% of $REZ, its native token, for the airdrop. However, users weren’t satisfied with the token supply chart. The adverse reaction within the liquid staking community probably intensified the sell-off.
The crash was short-lived, however, with ezETH quickly rebounding to over $3,000, while ETH traded at $3,281 at the time of reporting.
Depegs are not exclusive to stablecoins. As the analyst wrote, depegs on liquid restaking protocols can happen based on temporary pool imbalance. It wasn’t bad news for specific users. According to Lookonchain, a trader known as czsamsunsb.eth made 121.654 two hours after ezETH depegged, a profit of $396,000.
Disclaimer
This article is provided for information only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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