stETH turns the tide: how the giant whale completes self-rescue after on-chain data review

With the further development of the stETH de-anchoring event in the previous period, there has been a lot of speculation around this topic. Curve’s stETH/ETH pool is unbalanced, the cause of which apparently goes back to the UST de-pegging.

Nansen’s report starts from the LUNA explosion and covers a series of “dominoes” of the crypto giants that occurred after that. After understanding the wallets of large-scale transactions of stETH, it deeply researches various entities and analyzes them. their trading behavior. Conclusions include:

stETH is a derivative of ETH and, strictly speaking, does not require an equivalent transaction with ETH (ie 1:1 ETH pegged);

The stETH price is still changing, which creates an opportunity for others to buy stETH at a lower price than ETH;

Most of the time, stETH traded with ETH (1:1) until the UST/LUNA de-pegged; after the UST de-pegged, the stETH/ETH exchange rate in the Curve pool dropped to 0.94.

stETH de-anchored hits Curve TVL

Before UST was de-anchored, the prices of stETH and ETH had been relatively equal. After the explosion of UST, the stETH/ETH exchange rate began to fall below 1:1, and the gap has continued to widen since then.

From June 1-7, the ETH/stETH ratio in the Curve pool remained relatively stable at 0.45, while the stETH price was at 0.98 ETH. Signs of a decrease in the stETH/ETH exchange rate began on June 7, when the ETH balance decreased and the stETH balance increased.

From June 9th to June 10th, both ETH and stETH balances decreased by more than 100,000, as stETH continued to trade at a discount of 0.97. Given the volatile macro environment, this has led users to further reduce position risk by withdrawing liquidity and/or selling stETH to acquire ETH. Loss of liquidity and additional selling pressure put further pressure on stETH, with the exchange rate hitting a low of 0.94 on June 11.

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

Although the exchange rate of stETH recovered slightly to 0.96 on June 12, the confidence of token holders is still low due to the continuous outflow of Curve pool transfers. Curve TVL lost nearly $1 billion in just two weeks.

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

Large redemption 4 days before drop

To understand what caused the price of stETH to drop relative to ETH, we looked at wallets that made a large number of stETH transfers in June. Although the first price drop occurred on June 7, the mass redemption started on June 3.

The chart below shows the largest transactions of stETH between June 1st and June 12th. Based on this data, we analysed the top deals across entities, mostly from June 3 to 11.

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

The table below shows the top 11 wallets with a high volume of stETH transfers between June 3rd and June 11th, in chronological order:

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

What is the crypto asset management platform Amber Group doing?

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

At 8:37 on June 10 (full text in UTC), Amber Group (0x12b5c9191e186658841f24319433c47278f68e075) withdrew all liquidity from the stETH-ETH Curve pool, totaling 83,380.47 stETH and 26,733.52 ETH. At the time, the price of stETH was 0.96 ETH. With the Curve pool’s ETH/stETH ratio at 28%, Amber Group likely wants to “hold” liquidity until more ETH is drained.

From 4:05 on June 10th to 7:27 on June 11th, Amber Group sent a total of 77941 stETH to the FTX deposit address in 6 separate transactions. Given how illiquid FTX’s stETH/USD market is, Amber is unlikely to sell their stETH on the open market. There were very few orders at the time, as long as they sold $16,000, the price fell by 2%, and the market value at the time of their stETH position was about $125 million. It is possible that Amber Group has an OTC deal with FTX, or they are simply trying to cover their stETH positions with a CEX like FTX.

Crypto lending platform Celsius

The wallets to be analyzed below include:

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

Between June 8th and June 9th, Celsius withdrew a total of 50,000 stETH from Aave through multiple transactions from Wallet A. Funds are sent to Wallet A’s close counterparty, Wallet B, then through Wallet C, and eventually into an FTX deposit, which may be a signal for an OTC (over-the-counter) trade.

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

During the same time period, wallet D sent additional funds to wallet A in the form of WBTC, USDT, USDC, DAI. The funds are either used to increase collateral or pay off debts on Aave and Compound.

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

Celsius may face liquidity issues given market volatility and meeting customer redemption needs. As the stETH-ETH Curve pool dries up and liquidity dries up, Celsius will not have enough liquidity to exit its stETH position. In the 6-12 months after the merger of Ethereum, stETH cannot be exchanged for ETH, and the only intermediary that can trade ETH is the secondary market. With 409,000 stETH deposited in Aave and only 127,000 ETH left in Compound, Celsius cannot “unload” stETH on-chain without incurring slippage losses. Additionally, CEXs have insignificant liquidity and trading volume compared to Curve pools, making it impossible to sell through CEXs.

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

Additionally, between June 8 and 12, Celsius used Wallet A to borrow USDC and USDT from Compound and Aave, and sent funds to Wallet E, presumably to meet redemptions. A total of $59.5 million in USDC and $2 million in USDT were borrowed on-chain. Wallet A also withdraws 112,500 ETH and sends it to Wallet E.

To maintain a healthy loan-to-value ratio, they continuously send funds from wallet D to wallet A to repay the loan and replenish the collateral.

June 10-12: After the Celsius platform stopped withdrawals, wallet B sent a total of 108,900 ETH to wallet F, which then sent the same amount to 0xfdc8eb4815e58152c956c367323b5e08d29f0438 (FTX deposit address), and then to 0xc098b2a3aa6543TXaaef5c3940xc098b2a3aa6543TXaaef5c396d2140a208 address).

These funds for Wallet B came from several wallets – 52,800 ETH from Wallet A, 42,000 ETH from Wallet F, 13,600 ETH from Wallet D, 1400 ETH from 0x07ce9e0375497c81c603c63f37ffbc03860c23f9, and 1000 ETH from 0xe081abb7d9e327e89a13e65b3e2b6f ETH from 0xe081abb7d9e327e89a13e65b3e2b6f.

At 1-2:00 on June 13th, wallet B also sent a total of 9000 WBTC to 0x76a05277b81b9ca6c06c9ab4136116fc53e9c9e1 (FTX deposit address). These funds all come from wallet A.

As of June 22, Wallet A remains the first lender/borrower for ETH (including wETH and stETH) and wBTC collateral on Aave and Compound, with a total collateral value of nearly $1 billion. Currently, as long as their collateral prices don’t drop abruptly by 37%, their health ratios are still relatively strong. On Aave, the health rate is 1.88 (meaning the price would need to drop 47% to be liquidated). Whereas Compound has a P/E ratio of 1.58 (meaning the price would need to drop 37% to be liquidated).

Whale Wallet

In addition to the aforementioned entities, we also looked at whale wallets with a high volume of stETH transactions between June 1st and 15th, and narrowed it down to 7 key wallets.

1. Wallet address: xd275e5cb559d6dc236a5f8002a5f0b4c8e610701 (large DEX trader)

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

At 15:18 on June 3, the wallet withdrew 47353 stETH and 3991 ETH of all liquidity from the stETH-ETH Curve pool. The ratio at the time was 0.978 stETH/ETH. In less than 20 minutes, the wallet deposited all the money into Aave to replenish the collateral. From 13:40 on June 10th to 15:54 on June 13th, the wallet traded ETH and stETH several times, netting 3421 stETH, which was eventually deposited into its Aave loan position. There doesn’t appear to be any malicious behavior here, the wallet simply took their liquidity out of Curve and deposited into Aave as collateral, most likely to prevent liquidations during market volatility.

2. Wallet address: 0xca2c8b7664fa4169bd85da72a968dab9b78f5882 (large Token holder), 0x7ccd3befb83154b99c02f4dd5aec5dd76f1ee0b2 (large ETH holder)

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

During 9-10pm on June 6th, two wallets withdrew all liquidity from the stETH-ETH Curve pool: 54076 stETH/23515 ETH and 54103 stETH/23489 ETH, respectively. Both wallets still hold all stETH and when liquidity is removed from Curve, the stETH/ETH ratio is 0.978. It is likely that both wallets wanted to avoid illiquidity in the pool and decided to preemptively remove liquidity.

3. Wallet address: 0x1b2382E16268c26F5dfC814a84ae156671362B5C, 0x2E85891e813b9Bd72db0b9065414B9888D1FDDFD

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

On June 8, 4:57 – 6:32, the two wallets received 22855 stETH and 19998 stETH respectively from the FTX trading platform wallet. At 7:45 on June 8th, 0x1b swaps all 22855 stETH for 22323 ETH via Cowswap, 0x2E swaps 19998 stETH for 19481 wETH via CoW Protocol. Over the next two days, the exchanged ETH was sent to their FTX deposit address and the wallet was emptied. Note that both wallets added ETH from FTX and are brand new wallets.

4. Wallet address: 0xcde35b62c27d70b279cf7d0aa1212ffa9e938cef

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

The wallet withdrew 38,420 stETH and 2,706 WETH of all liquidity from the stETH-ETH pool at 2:42 on June 10. Subsequently, all stETH funds are deposited into their Aave loan to replenish the collateral. Between June 10 and 12, they began to further reduce risk by repaying the Aave loan.

5. Wallet address: 0x5f8f52ddc15990a45ba5aab85dfd9fdfae11b661

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

The wallet purged all liquidity of 24607 stETH and 6689 ETH from the stETH-ETH pool at 17:23 on June 10th. All stETH remains in the wallet. Again, the behavior of the wallets does not imply any suspicious signs, possibly a reluctance to provide liquidity knowing that the pool may be draining all ETH.

Cryptocurrency Hedging Funds – Three Arrows Capital

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

Between June 1st and June 11th, we saw a total of 18,050 ETH moved from 3AC to Deribit, most of which were delivered after June 7th. These ETH deposits into derivatives may be used as additional collateral to protect 3AC’s current positions or to take new positions to hedge 3AC’s current portfolio.

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

At 1:41 on June 7th, Wallet A withdrew a large sum of 29054 stETH from BlockFi and sent it directly to Wallet B. Shortly after, the 9710 stETH received was deposited into Aave as collateral.

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

At 2:20 that day, 3AC became more cautious because Wallet B borrowed 7000 ETH from Aave using the 9709 stETH deposited earlier as collateral. Within 5 minutes, the 7000 ETH was quickly sent to 3AC’s FTX deposit address, possibly for sale. The trade may be used to hedge against downward pressure on ETH prices.

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

On June 8, perhaps 3AC was still quite happy with their position. Observe that Wallet B withdraws 1785 stETH collateral from Aave and Wallet E trades 9400 wETH for 9652 stETH on 0x Protocol.

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

Shortly after the transaction, Wallet E then deposited 700.48 wETH and 9652.89 stETH into the Curve stETH pool.

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

Interestingly, between June 8 and 9, we see that wallet D received 2500 ETH from wallets marked as high activity on Nansen (0x962fe6f349c320417e1992443c0852b1d95060f2) and 1700 ETH from Deribit; 4000 are sent to FTX again.

On June 11th, Wallet E withdraws liquidity from the Curve stETH centralized pool previously added on June 8th, and then sends 10387.66 stETH to Wallet F, which then deposits the received 7282.4 stETH into Aave as a pledge, and borrows 4790 ETH, sent directly to Deribit.

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

On June 13, we started to see signs of panic. Wallet G starts to unwrap its wstETH and sells it via Cow Protocol in exchange for wETH. This wallet alone exchanged about 46,100 wETH for 49,022 stETH in 5 transactions on Cow Protocol that day.

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

A large portion of these wstETH is confirmed to come from wallet I, which alone transferred a total of 34,600 wstETH to wallet G between June 13 and 14.

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

Wallet G also withdraws 675.1 steCRV liquidity from the Curve stETH pool and exchanges it for 679.9 ETH. Interestingly, wallet G also sent two large transactions to wallet H, which was flagged as a “whale” by Nansen. steCrv Token represents a share in the Curve stETH-ETH pool.

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

The first of these two transactions was a transfer of 12967 ETH to H wallet at 4:11 on June 13. At around 17:35, another transaction amounting to 33856 ETH was subsequently transferred to the same wallet H.

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

On June 14, 3AC aggressively repaid Aave’s debt.

Starting at 8:08, Wallet D received 14,950 ETH from FTX in 9 transactions. Of these, 4790 ETH was transferred to wallet F at 8:17, then at 8:19 they were transferred to Aave to repay the loan.

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

Wallet B and Wallet F also banned stETH as collateral on Aave that day, marking the end of their Aave positions. At 9:10, at least 88626 stETH was withdrawn from Aave.

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

Throughout the morning, we observed wallets B/C/F taking stETH collateral from Aave and clearing it by exchanging the stETH they owned (including previously taken from Aave) for ETH on 0x Protocol and CoW Protocol stETH position. A large portion of these ETHs were also used to repay 3AC’s loan on Aave. Subsequently, Wallet C sold the ETH it received earlier to DAI.

Wallet B traded 38900 stETH to 36718 ETH in 2 transactions;

Wallet C has traded 17,780 stETH to 16,625 ETH in total, which is used to trade 20 million DAI;

Wallet F trades 7284 stETH for 6981 ETH.

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

From June 15th, we observed 3AC closing its ETH/stETH position by exchanging the token for stablecoins. For example, as of June 16, Wallet B continued to sell the remaining stETH held in the wallet, totaling approximately 19.8 million USDT on 0x Protocol.

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

Nansen replays the encryption giant to save itself: how to prevent the collapse of tens of billions of dominoes

Summarize

There has been a hot discussion about stETH “de-anchoring” recently, but the foundations of the current situation were laid a month ago during the UST crash.

Observing the main liquidity pool of stETH on Curve, we can see that the first major liquidity drop occurred during this period, and the reserves of stETH and ETH in the pool were seriously imbalanced.

Terra’s largest protocol, Anchor, was the gathering place for a large amount of stETH, with the vast majority returning to mainnet between May 7-16 as Terra finally collapsed. On May 8, a single entity transferred 74,700 stETH from Terra back to the mainnet via a cross-chain bridge and sold most of it to UST, presumably to resist the de-anchoring of UST. Later cross-chain activity is likely due to fears of Terra crashing and stETH getting stuck, or being drained due to weakened security of the chain.

This added to the selling pressure on stETH, which in turn could prompt many LPs in the stETH/ETHCurve pool to withdraw their liquidity, the largest being 3AC and Celsius, with a total of $780 million worth of liquidity withdrawn on May 12 (worth $780 million). Note that neither 3AC nor Celsius were large sellers of stETH during this period, nor did they retain most of the stETH, despite a large amount of liquidity being withdrawn from the pool in the form of stETH. As a result, some other large players with (over) leveraged stETH/ETH positions on Aave attempted to close their positions, which depended on a stETH:ETH price ratio close to 1, resulting in more selling pressure on stETH. The current main stETH Curve pool has not recovered and still maintains significantly lower liquidity and a severe ETH/stETH imbalance.

In recent events, withdrawals from Curve pools have shown that many want to de-risk their investments. Big players such as Celsius and 3AC are affected by the market downturn, which further exacerbates the stETH/ETH price deviation. In the case of Celsius, maintaining liquidity to meet customer redemptions may be its top priority. Therefore, they must wean themselves off their reliance on other liquid assets while protecting leveraged assets by paying down debt. The suspension of withdrawals will likely help prevent a bank run while giving Celsius time to recalibrate and manage risk in its investments.

From the on-chain data, we observe that 3AC is unlikely to have caused a significant deviation between the price of stETH and the price of ETH between June 9th and 11th, and appears to be a victim of this “contagion”. 3AC’s lack of sound risk management, coupled with excessive leverage, can be said to be a bomb detonated by stETH’s “unanchored”. As mentioned, it was not until June 13 and 14 that the 3AC began to close its stETH positions for ETH and stablecoins, most likely to reduce its risk and reduce losses.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/steth-turns-the-tide-how-the-giant-whale-completes-self-rescue-after-on-chain-data-review/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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