Key Takeaways
- A crypto whale converted 11,200 ETH into stETH, then borrowed 10 million USDT to purchase additional stETH, optimizing capital efficiency.
- Ethereum (ETH) is a foundational cryptocurrency and blockchain platform for decentralized applications, while stETH represents staked ETH in Ethereum 2.0’s PoS network.
- The strategy carries risk due to potential price volatility, collateralization requirements, and interest when borrowing USDT on MakerDAO.
In the crypto world, whales have always been a topic of interest. Today, WuBlockchain took to Twitter to announce that a whale converted 11,200 ETH ($18.36 million) into 9,839 stETH. Apparently, the whale deposited stETH in Maker in order to borrow 10 million USDT. Turns out that following this move, the whale used the borrowed 10 million USDT to purchase 6,091 stETH at an average price of $1,644.
The whale’s actions, in fact, aimed at improving capital efficiency. Through this action, the whale will be able to access liquidity in the form of USDT without selling their staked ETH. Now that the basics are covered let’s scoop into the details.
Role of Ethereum (ETH) and stETH
Ethereum (ETH) takes pride in being a pioneering cryptocurrency that serves as the foundation for decentralized applications (DApps) and smart contracts. The current also plays a pivotal role in the crypto market as a leading blockchain platform that allows developers to build decentralized solutions for various industries, including finance and gaming.
Staked Ethereum (stETH), on the other hand, is a derivative asset that represents ETH and has been staked in Ethereum 2.0’s proof of stake (PoS) network. Through stETH, ETH holders are able to participate in the ETH PoS consensus mechanism while earning rewards. It helps in enhancing networking’s security and scalability and reduces energy consumption significantly.
The Strategy
While what the whale has done is an outstanding strategy, it is not one without risk. If the price of stETH or ETH faces volatility or decline, there is going to be a substantial loss. Additionally, there may be interest or collateralization requirements associated with borrowing USDT on MakerDAO, which the whale needs to manage to avoid liquidation of their collateral.
All in all, the whale’s $18.36 million conversion has taken Twitter by storm right now. With its positive impact on capital efficiency in the crypto space, this update is indeed one of a kind.
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