Renzo’s liquid restaking token (LRT), ezETH, faced a significant downturn this week, experiencing a rapid drop of over 7% in its peg with Ether (ETH) within a few hours. Some decentralized applications even witnessed a staggering 50% depeg. This decline was exacerbated by the liquidation of leveraged yield farmers who utilized ezETH as collateral for high-risk loans. The volatility in the liquid restaking market was highlighted by IntoTheBlock’s latest edition of “On-chain Insights.”
On April 24, ezETH saw a record trading volume of $1.5 billion as market participants reacted to the liquidations, causing panic and uncertainty. While some in the crypto community expressed concern over depeg scenarios, Renzo confirmed that ezETH remains fully backed by ETH.
IntoTheBlock also noted that the Renzo team has announced plans for three audits and is preparing the protocol for ezETH redemptions for underlying ETH by May. Additionally, they have increased the initial airdrop supply from 5% to 7% to stabilize community sentiment.
Despite the turbulence in the restaking market, the underlying protocol is expected to recover from this disruption. Meanwhile, EigenLayer, a protocol enabling applications secured by Ethereum, has surpassed $15 billion in total value locked (TVL) in less than a year. EigenLayer continues to attract deposits, with anticipation mounting for its upcoming token launch.
Currently, nearly 4% of all ETH and 40% of LRT supply is being restaked into EigenLayer. Users can deposit directly or through an LRT, which manages the assets on their behalf. The LRT landscape is competitive, with over $10 billion, or two-thirds of EigenLayer deposits, coming through these tokens.
EtherFi remains the leader in deposits, while Renzo has quickly risen to second place by expanding its decentralized finance presence, particularly in layer-2 blockchains.
However, the recent announcement of Renzo’s governance token REZ caused unexpected price fluctuations in ezETH. A controversial pie chart detailing token distribution sparked criticism and confusion on social media, adding to the selling pressure on ezETH and its subsequent discount relative to ETH holdings.
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