On July 23, prominent crypto analyst darkpools highlighted a significant buildup of 620,000 ETH in the unstaking queue, attributing it to several key market dynamics. Notably, large holders withdrew ETH from Aave, tightening supply and driving up both utilization rates and lending costs. Concurrently, users engaged in loop leveraging with stETH faced diminishing returns due to escalating expenses, prompting widespread deleveraging. This deleveraging influx pushed substantial stETH volumes into the staking withdrawal queue, while others opted to sell stETH outright, causing a notable 30 basis point discount relative to its peg.
The remaining leveraged holders confront a strategic crossroads: absorb a 30 basis point discount, equating to a 3% loss at 10x leverage, or maintain positions and incur ongoing interest expenses until stETH’s price stabilizes. Given that stETH’s oracle price reflects redemption value rather than market price, lenders are effectively locked in, potentially waiting up to 18 days for ETH unstaking to complete. Prolonged pressure risks triggering stETH liquidations from accrued interest, which could further destabilize its peg and exacerbate market volatility.