Renzo’s liquidity token ezETH experienced a brief disconnection this morning, with prices dropping to 0.2 WETH at one point. This happened amid a large-scale liquidation event, particularly in the Morpho lending protocol, resulting in the liquidation of nearly a thousand ezETH tokens. However, this disconnection provided a buying opportunity for the market, and most buyers ended up profiting greatly.
(Background: Binance Launchpool> What is the liquidity re-pledge agreement Renzo and the REZ token economy? BNB temporarily reached 620 USD)
ezETH briefly disconnected to 0.2 WETH
Gearbox will release a report on ezETH disconnection
Buyers who bought the dip made a profit
The Ethereum liquidity re-pledge agreement Renzo, which gained popularity due to its listing as the 53rd new coin mining project on Binance, experienced a brief disconnection this morning. This caused some panic in the community, as there were concerns about the risks associated with such liquidity pledging or re-pledging agreements leading to a chain of liquidations.
According to Dexscreener data, the ezETH and WETH pools on Uniswap were originally stable at a 1:1 exchange rate. However, around 10:35 am today, the price briefly disconnected and reached a low of 0.2132 WETH, equivalent to $688. Fortunately, it quickly stabilized around 0.97 WETH at around 11 am and maintained this level until the time of writing.
Investigating the cause of ezETH’s brief disconnection, it may be related to a series of liquidation events in the Morpho lending protocol. According to data from the platform, at 10:34 am this morning, user (0xaA…FB13) was the first to be liquidated for 256.93 ezETH, worth approximately $837,000. Then, from 10:37 am to 10:40 am, user (0xB0…1d12) experienced a series of liquidations, totaling 702.27 ezETH, worth approximately $2.29 million.
Regarding the ezETH disconnection event, it may be a “chicken and egg” problem. On one hand, the chain of liquidation trades undoubtedly intensified the extent of ezETH disconnection. On the other hand, fundamental factors such as insufficient liquidity on Uniswap and ETH price volatility may also be the root causes of this event.
Gearbox, the protocol that provides up to 9x leverage for ezETH, responded by stating that Renzo has not publicly commented on this event yet.
The disconnection of ezETH’s price not only caused panic among investors but also attracted buyers looking for an opportunity to buy the dip. According to data monitored by the X account Ai Yi on the chain, a whale spent 2,400 ETH to purchase 2,499 ezETH (worth approximately $6.98 million) and made a net profit of 99 ETH.
In addition, data from Lookonchain shows that czsamsunsb.eth invested 4,099 ETH to buy 4,221 ezETH and realized a net profit of 121.65 ETH (worth approximately $395,400) in about 2 hours.
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