A well-known liquid restaking token, ezETH, faced a significant depegging incident, resulting in the liquidation of millions from users using the token as collateral on leverage protocols like Gearbox. The value of the digital asset dropped to $2,755 before recovering to $3,178. Decentralized exchange Uniswap saw an even more severe depegging of ezETH, with its value plummeting to as low as $700 due to liquidity challenges.
Renzo, a prominent liquid restaking protocol, has over $3 billion worth of assets locked on its platform. The DeFi protocol Gearbox confirmed that the depegging led to the liquidation of several Credit Accounts. Simultaneously, Cork Protocol explained that the liquidations caused a significant sell-off of ezETH, overwhelming the market and driving the price down.
The depegging took place around the release of Renzo’s native REZ token, leading to the emergence of phishing scams related to Renzo. Web3 security firm Scam Sniffer identified instances where users lost over $500,000 to a scam. Amidst the market turmoil, a trader made a profitable move by investing in ezETH.
Analysts expressed concerns about depegging risks for Liquid Restaking Tokens (LRTs). They warned of potential exacerbation in depegging, especially if certain upgrades are introduced. The risk of slashing and liquidity concerns could trigger disruptions and mass withdrawals in the LRT ecosystem.
Overall, the depegging event highlighted the risks associated with LRTs and the importance of monitoring and managing these risks in the ever-evolving crypto market.
