Ethereum News Today: StETH Depeg Risks Trigger $3.28 Billion Exit Queue and DeFi Liquidity Shift

Redemptions of stETH from Lido, one of the largest liquid staking protocols, are accelerating, with Figment gaining notable market share as a staking alternative. According to on-chain analyst Ben Lilly from Jlabs Digital, this shift appears to align with the growing adoption of Figment as a potential staking partner for ETFs [1]. The movement of stETH from Lido has introduced significant volatility into the DeFi lending landscape, particularly as 278,000 wstETH tokens are now in a “high-risk” collateral position. These assets are defined as having a health factor between 1 and 1.1x, making them highly susceptible to liquidation if stETH continues to depeg from ETH [1].

Approximately 32% of the wstETH supply is currently being used as collateral across lending protocols. This widespread usage underscores the systemic importance of stETH in the DeFi ecosystem. A further depeg could trigger cascading liquidation events, as lending platforms typically enforce strict loan-to-value ratios. The risk of forced asset sales is a growing concern, especially given the historical precedent of similar depegging events in mid-2022 that led to significant liquidations [1].

The Ethereum validator exit queue has also expanded to one of the longest in months, with over 698,575 ETH—valued at $3.28 billion—waiting for withdrawal as of August 14. This represents a clear trend toward liquidity over staking, as stakers increasingly favor direct ETH exposure over the yield offered by stETH. The shift highlights a broader skepticism toward the stability of stETH as a reliable collateral asset and reflects a desire for greater control over underlying holdings [1].

Analysts suggest that the current wave of redemptions is being driven by a combination of profit-taking following Ethereum’s price recovery, the unwinding of leveraged positions, and a preference for ETH liquidity. These factors are compounding pressure on stETH’s peg, prompting some market participants to reevaluate their exposure to the token [1]. The depeg has already had tangible effects on the DeFi market, with lending protocols recalibrating risk models and adjusting collateral requirements in response to the changing dynamics of stETH’s value.

A significant depeg could have broader implications beyond individual stakers. Given stETH’s widespread use in DeFi protocols, a large-scale devaluation could trigger asset impairments and liquidations across the ecosystem. The interconnected nature of these protocols means a failure in one could have cascading effects on others. This potential for systemic risk underscores the importance of continued monitoring of on-chain activity and market sentiment.

As the Ethereum staking landscape evolves, the actions of key staking providers and the trajectory of ETH prices will be crucial in determining whether depegging risks stabilize or worsen. Regulatory developments, including the potential launch of staking ETFs, may also play a role in shaping the direction of the market [1].

Source:

[1] Ethereum staking faces $3.28 billion exit queue as delays hit longest wait in months (https://cryptoslate.com/insights/ethereum-staking-faces-3-28-billion-exit-queue-as-delays-hit-longest-wait-in-months/)