Here's Why Ethereum (ETH) Dropped to 2018 Highs of $1.3K

Ethereum, the second-largest cryptocurrency is currently down by over 15% in the last 24 hours. Ether is currently valued below $1300. The last time the DeFi king traded below $1300 was in January 2021, shortly before it broke its previous ATH. Prior to that, this significant level was its resistance in 2018, before the crypto market changed direction. Several factors have contributed to Ethereum’s recent low. Notably, stETH recently lost its peg with ETH, causing panic amongst investors.

stETH losing its Peg with ETH is Bad for Investors

Alameda Research and the Celsius network have been directly affected by the peg loss. The Lido protocol supports stETH, which is staked Ether and is meant to maintain a 1:1 value with ETH. However, a severe imbalance in the liquidity pools has led to stETH losing its peg. stETH has been trading 4-5% away from Ether.

Following the de-pegging, Alameda Research closed its stETH position and sold off nearly $50,000 stETH within a few hours. Other retail investors followed the course of Alameda, selling off significant volumes of stETH and ETH in Lido pools.

AlamedaResearch exited their position yesterday and unload nearly 50k stETH over a matter of hours. CelsiusNetwork is quickly running out of liquid funds to pay back their investors who are redeeming positions. By @SmallCapScience https://t.co/3wcUEGksh0
— Wu Blockchain (@WuBlockchain) June 10, 2022

Celsius network is also affected by the market conditions. Celsius has nearly $1.5 billion of investors’ funds as staked ETH. At the moment, the Celsius network is running out of liquid funds to pay investors. They have lost huge sums to hackers and market crashes already and market conditions aren’t getting any better. Celsius lost $70 million worth of ETH in a StakeHound exploit last year. The network also lost $50 million in the BadgerDAO front-end exploit, and more significantly, $500 million worth of investors’ funds were lost in the LUNA debacle about a month ago.

At the moment, things are getting hotter for the Celsius network, and investors have been trying to redeem their positions. Just before things got worse, Celsius announced that they will be pausing withdrawals for now. The team acknowledged that extreme market conditions have led to the decision and its decision is with the community’s interest at heart.

Although the prices of digital assets have collectively tumbled, the de-pegging of stETH from ETH has amplified the panic, causing a huge sell-off from stETH and Ether investors.