Celsius Seeks Major ETH Withdrawal from Lido: Impact on Liquidity and Platform Stability

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Bankrupt crypto lending firm Celsius has recently displayed eagerness to retrieve its staked Ether (ETH) from liquid staking platform Lido. This development follows the announcement that Lido now enables withdrawals, giving borrowers the chance to access their funds.

Celsius, a company that has suffered significant financial losses, initiated the process of taking back its Lido Staked ETH (stETH) from the protocol. Transaction data reveals that Celsius has sought the withdrawal of 428,840 stETH, valued at approximately $784.7 million at current prices. The withdrawals have been carried out in batches of 1,000. Prior to this, on May 15, a transaction of a similar amount of stETH was recorded in preparation for withdrawal.

Upon completing the withdrawal process, Celsius will receive an equivalent in Ethereum, and the stETH tokens will be burnt by Lido. This move may seem like a lifeline for the struggling Celsius. However, withdrawing such a significant amount of stETH can potentially create liquidity concerns within the Lido protocol.

According to Dune Analytics, the cumulative amount of stETH in the withdrawal queue is 442,000 from 141 requests. This sum equates to approximately $808 million, with Celsius being responsible for the vast majority of it. The total amount already processed is 629 ETH.

Lido, however, appears prepared for these substantial withdrawals. On May 16, the platform announced that it had sufficient ETH in its buffers to process the requests. At the time of the statement, Lido’s protocol had around 440,000 ETH available within the protocol buffers.

The withdrawals observed between May 15 and 17 hint at the possibility of more significant withdrawals happening this week. If such large-scale withdrawals do materialize, Lido’s surplus will likely be used to absorb them, ensuring the stability of the platform for other users.

In conclusion, as Celsius seeks to withdraw its stETH and receive equivalent ETH, Lido’s ability to handle these withdrawals showcases the platform’s preparedness for similar situations. Although the situation may seem precarious at first glance, Lido’s assurances and existing protocol buffers demonstrate resilience and a readiness to accommodate user requests, even in the midst of large withdrawals.

Source: Cointelegraph

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