Paradigm researcher Hasu: What does the discount on stETH mean?

Paradigm researcher Hasu posted about Curve's ETH/stETH liquidity pool, stating: "One ETH is now worth 0.98 ETH, what does this mean?"

Paradigm researcher Hasu posted about Curve's ETH/stETH liquidity pool, stating: "1 ETH now equals 0.98 ETH, what does this mean?"

Hasu first explained what "stETH" is, one stETH can claim one ETH staked on the Ethereum Beacon chain; it can be claimed when the Beacon chain allows it. The role of stETH in the primary market is to claim ETH, but it can also be traded: this is the secondary market of stETH. The value of stETH in the secondary market does not affect the value in the primary market, as it is a 1:1 exchange.

Additionally, stETH is an ETH2 staking certificate provided by the staking protocol Lido, allowing users to stake while maintaining liquidity.

Hasu consistently emphasizes: almost everyone will not be affected by the price of stETH in the secondary market.

Except for who? Hasu points out that it is those who "want to sell stETH when the primary market opens." Particularly those who use their stETH as collateral to pursue leverage, which is those engaged in leveraged staking.

Depending on the extent of leverage, if the price of stETH in the secondary market drops, your initial stETH may be lower in price compared to the ETH obtained through borrowing. If the price drops significantly, there will be liquidation risks.

He warns people to be cautious about being liquidated. If you are using leverage, which here refers to DeFi's repeated staking and borrowing:

• Pay attention to the Loan-to-Value Ratio (LTV) to withstand market fluctuations
• Stay alert and react promptly
• Utilize automated deleveraging tools: DeFi Saver

In addition, Hasu mentions that currently, everyone can take advantage of the discounted stETH and exchange it back for 1 ETH in the future, along with staking rewards and LDO rewards provided by the staking protocol Lido.

The staking protocol Lido also stated yesterday that although there is an imbalance in Curve's liquidity pool, stETH is safe, but one must be mindful of leverage liquidation risks.

However, despite the staking protocol Lido being one of the top three protocols by TVL currently, risks should still be considered, as the day when ETH can be claimed on the Beacon chain is still uncertain.