Renzo’s liquidity token, ezETH, experienced a brief detachment this morning, with the price dropping to 0.2 WETH at one point. This event occurred amidst a large-scale liquidation activity, particularly in the Morpho lending protocol, resulting in nearly a thousand ezETH tokens being liquidated. At the same time, this detachment provided a buying opportunity for the market, with most buyers profiting greatly.
(Background information:
Binance’s new Launchpool: What is the Renzo liquidity repledge agreement, REZ token economics? BNB briefly reached $620.
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ezETH briefly detached to 0.2 WETH
Gearbox will release an ezETH detachment report
Buyers who bought the dip made significant profits
The Ethereum liquidity repledge agreement, Renzo, gained significant attention with its launch on Binance’s 53rd new coin mining project last night. However, its liquidity token, ezETH, experienced a brief detachment this morning, causing temporary panic within the community and concerns about the risks of such liquidity pledging or repledging agreements leading to a cascade of liquidations.
According to Dexscreener data, ezETH and WETH were originally stably pegged at a 1:1 exchange rate in the Uniswap liquidity pool. However, at around 10:35 am today, it briefly detached to a low of 0.2132 WETH, equivalent to $688. Fortunately, it quickly recovered to 0.97 WETH around 11 am and maintained this level until the time of writing.
Exploring the reasons for the brief detachment of ezETH, 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, a user (0xaA…FB13) was the first to be liquidated for 256.93 ezETH, worth approximately $837,000. Subsequently, from 10:37 am to 10:40 am, another user (0xB0…1d12) suffered a series of liquidations, totaling 702.27 ezETH, worth approximately $2.29 million.
Source: Morpho liquidation transactions
Regarding the detachment of ezETH, this may be a “chicken and egg” problem. On one hand, the chain of liquidation transactions undoubtedly exacerbated the detachment of ezETH. On the other hand, fundamental factors such as insufficient liquidity in Uniswap and ETH price volatility may also be the underlying reasons triggering this event.
Gearbox, the protocol offering up to 9x leverage on ezETH, responded by stating that Renzo has not yet made any public comments on this event.
The detachment of ezETH’s price not only caused panic among investors but also attracted buyers seeking to buy the dip. According to on-chain data monitored by AI Yi, an account on X, a whale invested 2,400 ETH to purchase 2,499 ezETH (approximately $6.98 million), earning a net profit of 99 ETH.
Furthermore, data from Lookonchain indicates that czsamsunsb.eth invested 4,099 ETH to purchase 4,221 ezETH and realized a net profit of 121.65 ETH (approximately $395,400) within about 2 hours.
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