Renzo’s Restaked ETH Depegs to $700: DeFi Platforms Gearbox and Morpho Face Liquidations

• Renzo’s Restaked Ether (ezETH) experienced a depeg to $700, causing significant liquidations across DeFi platforms.
• Gearbox and Morpho Labs were among the platforms affected by the depegging event.
• The depeg was primarily attributed to the end of Season 1 of Renzo’s airdrop.
• Renzo Protocol, the second-largest liquid re-staking protocol, holds $3.3 billion in total value locked (TVL).

DeFi Platforms Gearbox and Morpho Face Liquidations Following Renzo’s Restaked ETH Depeg

In a recent shakeup within the decentralized finance (DeFi) space, Renzo Protocol’s Restaked Ether token (ezETH) depegged to $700, leading to a cascade of liquidations across DeFi platforms, including Gearbox and Morpho Labs. This depegging event is attributed to the conclusion of Season 1 of Renzo’s airdrop, which prompted a sell-off among airdrop hunters looking to cash in on their staked Ether (ETH) and move to other projects.

Renzo Protocol, the second-largest liquid re-staking protocol by assets, holds a significant $3.3 billion in total value locked (TVL), according to DefiLlama. This depegging event, although short-lived as the token quickly recovered its price parity with Ether (ETH), has highlighted the risks and complexities of the DeFi ecosystem.

Wave of liquidations

The depeg led to a wave of liquidations across DeFi platforms, with Gearbox and Morpho Labs being among the most notable. The impact was felt by “loopers,” users who repeatedly use liquid restaking tokens (LRTs) as collateral to borrow ETH for leverage. These users suffered the biggest losses, as the collateral value of their restaked Ether (ezETH) plummeted, triggering liquidations of their leveraged positions.

Adding to the drama, the price of Renzo Protocol’s incoming token, REZ, was added to Binance’s launch pool on the same day as the protocol announced its incoming airdrop. This dual-announcement strategy may have contributed to the sell-off, as users sought to take advantage of the airdrop and subsequent Binance listing.

This incident serves as a stark reminder of the risks associated with DeFi protocols and the importance of understanding the mechanics of liquid staking and restaking tokens. As the DeFi ecosystem continues to evolve and mature, users must remain vigilant and informed about the potential risks and rewards of participating in such protocols.