The value locked in decentralised finance (defi) protocols fell to a low of $110.35 billion on Friday, after hitting more than $200 billion in total value locked (TVL) eight days earlier on May 5. Lido, a liquid stacking platform and the second biggest Defi application in terms of TVL size today, has lost significant value over the last week, falling 49.66%.
Lido’s bonded ethereum tokens have been under pressure as a result of an imbalance on Curve’s bonded ethereum (stETH) and ethereum pool while being exposed to the Terra blockchain blunder.
Curve Finance said that it will be providing liquidity incentives to Lido in order to reduce the imbalance that has been occurring around the stETH:ETH peg.
On May 12, 2022, Lido tweeted, “We are deploying an additional Curve Finance pool to improve liquidity around the stETH:ETH peg.” “For the next week, this new pool will feature an additional 1 M LDO in incentives and is presently almost empty, suggesting high rewards to first depositors.” Prior to the announcement, Curve’s stETH: ETH pool was offering a 2% discount due to the instability surrounding the Terra blockchain.
Colin ‘Wu’ Blockchain, a crypto journalist, explained what was happening on Thursday. The journalist tweeted, “The ETH/stETH asset ratio in Curve’s largest TVL steth (ETH+stETH) pool is unbalanced.” People are exchanging stETH for ETH at a rate of 36.48 % /63.52 %. Users that use stETH for leveraged staking should be mindful of the risks of de-pegging.
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