In recent weeks, the collapse of Terra coupled with a broader market contraction has stimulated the market’s appetite for liquid assets. Since Lido’s stETH is nothing more than a claim on illiquid staked ETH, demand for stETH has fallen off a cliff. stETH is currently trading at a 5.6% discount to ETH on secondary markets, causing many to fear a similar meltdown to the LUNA / UST unwind.
However, unlike Terra’s solvency crisis, the stETH situation is a matter of liquidity. In its current state, stETH a one-way system: ETH may be deposited into Lido, but it cannot be withdrawn. The current discount on stETH does not mean that it is “unpegged” from ETH — there is no active redemption mechanism so a peg does not exist. While the market has grown accustomed to the idea that 1 stETH = 1 ETH over the last 18 months, stETH has actually been long overdue for this re-rating.
Chase's interest in crypto lies at the intersection of economics, psychology, and social coordination.