Riding The Wave News Summary #51
'Staked Ether' Becomes Focus of Crypto Stress, From Celsius to Three Arrows, Is the bottom in? Raoul Pal, Scaramucci load up, Novogratz and Hayes weigh in, & more
Welcome to Riding The Wave. If you have questions or feedback, please reply to this email. If you are new to the Newsletter, please check out what we provide on our about page and consider subscribing. Within the Newsletter, I provide News Summaries, Weekly Status Updates, & Deep Dive Articles on Specific Topics (Ex: How do I pick which coins/tokens to buy?). More details here
Table of Contents
A token known as "staked ether" has suddenly become a key focus for crypto traders trying to monitor extreme stress in digital-asset markets, as important players from the beleaguered lender Celsius to the hedge fund Three Arrows Capital and the industry heavyweight Sam Bankman-Fried's Alameda Research are dumping their holdings.
The key metric is the discount between the price of staked ether (stETH) – a token from the Lido Finance protocol that's supposed to trade at a price close to ether (ETH), the native cryptocurrency of the Ethereum blockchain – and the price of ether itself.
The discount shot to a record 8% on Monday, according to data by Dune Analytics.
The speculation, according to analysts, is that crypto market makers and lenders might be forced to dump their holdings of the stETH tokens to fund withdrawals and meet margin calls.
Celsius, a crypto lender that has come under scrutiny since it froze withdrawals last weekend, citing "extreme market conditions," holds 409,260 stETH tokens, worth about $470 million at current prices, according to data provided by Ape Board, a portfolio tracker from the blockchain analysis firm Nansen.
Worried Celsius users started a rapid wave of redemptions at a rate of around 50,000 ETH per week, the report added, and the platform was scrambling for liquidity.
“What Celsius can do is sell its stETH in order to buy ETH on the market to satisfy client requests,”
The drop in staked ethers value is a great opportunity for anyone looking for discounted ETH but personally I plan to wait to bring in any new positions beyond averaging into BTC until after the dust settles. Historically when we have reached the 200 week SMA we have stayed there for awhile & with a recession looming I think this is likely to happen again.
Some of the highest-profile investors in crypto believe that a crypto market bottom is fast approaching and the timing is right to buy — although one still warns of catastrophic outcomes should prices fall below established support levels.
Arthur Hayes, co-founder and former chief of BitMEX took a similar view, acknowledging on Twitter on June 13 that on-chain data for Wrapped Bitcoin (wBTC) and Ether indicated that “liquidations have mostly happened.”
However, Hayes warned that should support levels break for BTC and ETH at $20,000 and $1,000 respectively, we could expect “massive sell pressure in spot markets.”
Macro investor Raoul Pal is taking the recent market downturn as an opportunity to add to his crypto positions.
I always like to see what larger players in the space are doing as often they have more information and experience allowing you to benefit & make better decisions.
Keep reading with a 7-day free trial
Subscribe to Riding The Wave to keep reading this post and get 7 days of free access to the full post archives.