TL;DR
- Renzo’s ezETH Token Value Drops: Renzo, the second-largest protocol for liquid restaking, experienced a significant drop in the value of its restaked ETH (ezETH) token. The price plummeted due to limited liquidity in the market, moving away from its usual 1:1 peg with WETH to a low of 0.27.
- Liquidation and Discontent: The liquidation likely occurred as users aimed to retrieve their ETH and use it on other fluid re-staking platforms. An error in the token supply chart, which suggested that 65% of the supply was allocated to the team and investors, led to widespread discontent within the community.
- Swift Recovery: Despite the crash, the price of ezETH swiftly bounced back to over $3,000, serving as a reminder of the unpredictable nature and potential dangers of investing in cryptocurrencies.
Renzo experienced a sudden drop in the value of their restaked ETH (ezETH) token early on Wednesday. The token’s price plummeted significantly compared to wrapped ether (WETH) due to limited liquidity in the market.
According to information from DEXscreener, ezETH’s price dropped to $750 on Uniswap, an Ethereum-based decentralized exchange, around 02:45 UTC. The token’s value also moved away from its usual 1:1 peg with WETH, dropping to a low of 0.27.
Renzo is the second-largest protocol for liquid restaking, utilizing the Ethereum restaking protocol Eigenlayer. This platform enables users to restake their ether (ETH) and receive Renzo’s ezETH in return. With ezETH, users can explore various decentralized finance applications and earn additional yields.
Renzo unveiled its economic model and airdrop for its native token REZ on Tuesday. Users are eligible to receive the token on May 2. The inaugural rewards season will conclude on April 26, with the subsequent season commencing thereafter. Please note that users who sell ezETH before April 26 may forfeit their airdrop eligibility.
Error in Renzo’s Token Supply Chart: A Trigger for Discontent
The liquidation probably occurred as users aimed to retrieve their ETH and utilize it on other fluid re-staking platforms. “People sold ezETH on Uniswap, and they had lower liquidity, so the slippage caused the price to drop to below $700, which caused massive liquidation on [generalized leverage protocol] Gearbox and [lending protocol] morpho,” Hitesh Malviya, the founder of crypto analytics platform DYOR, said in a statement.
The problem arose primarily due to an error in the token supply chart, which suggested that 65% of the supply was allocated to the team and investors. This information was subsequently altered and the original tweet was removed, leading to widespread discontent within the community.
The price drop was probably made worse by traders getting rid of their ezETH collateral to borrow ETH and create leverage. Investors were also disappointed with the token supply chart, which contributed to the drop in price.
The crash didn’t last long, and prices swiftly bounced back to over $3,000. This serves as a reminder of the unpredictable nature and potential dangers of investing in cryptocurrencies.
