Wrapped stETH Plunges to $4,400 as Lido Withdrawals Trigger Sell-Off—DeFi ’Stability’ Strikes Again
Liquid staking's fragility exposed—again. Wrapped stETH (wstETH) tanked from $4,600 to $4,400 in hours as Lido withdrawals flooded the market. Another day, another DeFi 'risk-managed' asset proving Wall Street’s "volatility is contained" playbook works just as poorly on-chain.
Why the drop matters:
Lido’s withdrawal queue—once hailed as a buffer—became an exit ramp. The protocol’s TVL bleed turned stETH’s usual tight peg into a slippy slope. Market makers? Either asleep or exploiting the spread (spoiler: probably both).
Silver lining for degens:
Arbs are feasting. The wstETH/stETH decoupling opened 2% gaps—free money if you ignore the smart contract risk, centralized oracle dependencies, and the fact that Ethereum’s upgrade schedule moves at glacial speeds.
Bottom line: Liquidity mirages vanish fast in DeFi. When the 'wrapped' version of a 'stable' derivative of ETH swings 4% on routine withdrawals, maybe—just maybe—the system has more duct tape than Satoshi ever intended.
Lido DAO saw peak requests for unstaking, with the highest unprocessed queue for the past two years. | Source: Dune Analytics
Recently, the value locked in Lido expanded above $34B, based on the notional ETH valuation. The protocol offers 2.8% in annualized passive income, in addition to issuing the stETH and Wrapped stETH tokens for additional DeFi activities.
Wrapped stETH slides from the recent peak
As the use cases for regular ETH shift, Wrapped stETH has slid from its recent peak. The token habitually traded at a premium to ETH, recently peaking above $4,600.
In the past day, WSTETH retained its downward trend, losing 2.4% to $4,446.47. The recent slide also happened on record trading volumes.
WSTETH is mostly swapped against stETH and regular ETH, using Uniswap decentralized pairs. Even through DEX, the token achieves over $148M in daily volumes, expanding activity to a three-month peak.
The WSTETH premium means traders can acquire more ETH due to appreciation, or swap to stETH and then unstake it through the smart contract. WSTETH makes up 1.28% of locked ETH reserves, and the exodus may not hurt the ecosystem at scale. However, the turning of the trend may signal a shift in general Ethereum use cases.
Lido dominance in ETH staking slides lower
In the past two years, Lido’s staking dominance has fallen from over 75% of staked ETH to around 62.8%.
The biggest challenge came from Binance staking, which expanded its share from under 3% to over 20% since 2023.
At the same time, Lido is confident its stETH may be used by institutions for both ETF passive income and as a way to put ETH treasuries to work.
Lido has slowed down in the past year, though the protocol still generates robust revenues per user and remains a part of the basic DeFi infrastructure. Recently, Lido added BitGo as its first US-based custodian to offer staking infrastructure.
Similar unstaking events have happened before, though the protocol retained its influence while continuing to build its roadmap. In the coming months, Lido V3 is seen as a potential staking mechanism for the inflow of institutions into ETH. Overall, 30% of ETH remains locked in the Beacon Chain contract, and unstaking remains rare even for older whales.
Cryptopolitan Academy: Tired of market swings? Learn how DeFi can help you build steady passive income. Register Now
