Stephanie Douse 
Three Arrows Capital (3AC), a venture capital firm, has swapped $33 million worth of Lido Staked Ethereum (stETH) for Ethereum as stETH values in secondary marketplaces diverge further from ETH pricing.
Since last week, Three Arrows capital is the second large holder of stETH to dump the coin. Last Monday, crypto trader Alameda Research exchanged all of its token holdings for ETH, totaling around $1.5 billion.
That trade, which also happened on Curve, is most likely to blame for stETH’s divergence from ETH. The DeFi coin is presently trading at $1,103.15, and $1,173.96 for Ethereum.
According to crypto analyst @mhonkasalo, while the $33 million swap represents a significant portion of Three Arrows’ stETH holdings, the company still has roughly $22 million of the currency in one of its wallets.
Three Arrows has been consistently unloading stETH for the past month, according to on-chain statistics. The venture capital firm now looks to be putting the ETH it has obtained into AAVE and Lido loan pools.
While it’s unknown how much Three Arrows’ entire exposure to stETH is, the firm’s recent trades imply it’s trying to reduce it. However, coupled with Alameda, their swaps have caused a severe imbalance in Curve’s stETH liquidity pool.
The token currently makes up almost 80% of the pool, putting further downward pressure on pricing.
Staked Ethereum’s impact on markets
stETH has little impact on ETH pricing or the larger market on its own. When the merge becomes live, the token can still be redeemed for one ETH, despite its price dropping in secondary trade.
However, the token’s ambiguity is triggering panic selling of ETH and other cryptos. Worse, its use as collateral by key crypto lending platforms, namely Celsius, is threatening to liquidate billions of dollars’ worth of assets.
Due to the reduction in stETH prices, Celsius is experiencing a liquidity shortage, which is impacting its leveraged position.