Renzo’s liquidity token, ezETH, experienced a brief detachment this morning, with its price dropping to 0.2 WETH at one point. This event occurred amidst a large number of liquidation activities, 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 benefiting greatly.
ezETH temporarily detached to 0.2 WETH
Gearbox will release a report on ezETH detachment
Buyers who took advantage of the opportunity profited
The Ethereum liquidity rehypothecation protocol, Renzo, gained significant attention with its launch on Binance Launchpool’s 53rd phase. However, its liquidity token, ezETH, experienced a brief detachment this morning, causing temporary panic in the community and concerns about the potential cascade of risks associated with such liquidity pledging or rehypothecation protocols.
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.
In investigating the cause of ezETH’s temporary detachment, it may be related to a series of liquidation events in the lending protocol Morpho. 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. Then, from 10:37 am to 10:40 am, another user (0xB0…1d12) experienced a series of liquidations, totaling 702.27 ezETH, worth approximately $2.29 million.
Regarding the detachment of ezETH, this may be a “chicken and egg” problem. On one hand, the chain of liquidation transactions undoubtedly exacerbated the extent of ezETH’s detachment. On the other hand, fundamental factors such as insufficient liquidity in Uniswap and ETH price fluctuations may also be the root cause of this event.
Gearbox, the protocol that provides ezETH with up to 9x leverage, 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 looking for buying opportunities. According to on-chain data monitored by account Ai Yi, a whale invested 2,400 ETH to purchase 2,499 ezETH (worth approximately $6.98 million), resulting in a net profit of 99 ETH.
Furthermore, according to on-chain data monitored by Lookonchain, czsamsunsb.eth invested 4,099 ETH to purchase 4,221 ezETH and achieved a net profit of 121.65 ETH (worth approximately $395,400) within approximately 2 hours.
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