The crypto community is getting startled by a new token. The controversy lies on the staked ether or stETH, which is worrying the investors.

This is similar to the usual ether. However, some people find it alarming since it's on a trading discount over the past weeks.

What is Staked ETH?

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What is stETH and why do crypto traders worry about it?

According to CNBC, a stETH is a token that has been deposited, hence staked in the beacon chain. At the moment, the Ethereum network is making cryptocurrency cheaper to utilize. It's currently upgrading through the testing site.

It all takes effort to stake a token for a long time, but the return comes with a reward similar to interest. The so-called "proof of stake" is commonly heard when someone mentions staking.

As for ETH staking, an investor will be required to "lock away" at least 32 ETH. This will go on until a new upgrade in the network comes, which in this case is Ethereum 2.0.

However, there's this stETH that users get when they stake at Lido Finance. 

This token can be used for trading or lending purposes--something that we usually see from a typical blockchain firm. Unlike terraUSD or tether, stETH is not considered a stable coin. 

Ether and stETH Liquidity 

The collapse of Terra stablecoin had left a massive stain on the portfolio of investors. At the time, stETH's trading price continued to plunge, and traders were finding ways to get away from it.

Following this event, crypto lending firm Celsius suspended account withdrawals and transfers, citing the "extreme market conditions" that took place back then.

Speaking of which, over $400 million of stETH has been existing in Celsius, per Ape Board's data. 

However, the imminent loss could take place anytime because there's a tendency that Celsius will sell this token. If this occurs, the downward trend will continue and the value of the token will hurt the investors.

Another thing is the token holders are restricted in redeeming stETH until at least half a year. There should be a "merge" that will pop out first, which paves the way for ETH's proof of stake transition from proof of work.

According to CNBC, ether and stETH's liquidity pool is considered to be "quite unbalanced," Trakx.io economist Ryan Shea mentioned in the report.

"The exchange rate between stETH:ETH does not reflect the underlying backing of your staked ETH, but rather a fluctuating secondary market price," the expert said.

Related Article: 250,000 $ETH Burned | Where do 'Burned Coins' Go?

What's Concerning so Far

The security of Ethereum is now at stake since stETH has been Lido-staked. The specific issue behind is that some investors think that the upgraded ETH network would go unfavored because of "too much control" by a single player.

The upcoming merge could happen around August. However, there's a possibility that it won't take place either since it has faced many delays in the past already.

Meanwhile, Binance saw a skyrocketing trend in Bitcoin's selling pressure, per Coingape. The most popular crypto in the world has been steadily dropping at an all-time low since 2020.

Read Also: Dogecoin is Back in 10th Spot, Elon Musk to Keep Supporting, Buying Crypto

This article is owned by Tech Times

Written by Joseph Henry