A hedge fund wallet Three Arrows Capital () withdrew 33 million USD Staked (stETH) from Liquidity Farming Pool ( Liquidity Farming Pool).

Follow Etherscan and Nansen, this wallet also withdrew 200 (), 4 million USD () and $4 million Wrapped Ether (wETH) off Convex, a platform is different.

filed for bankruptcy in July after falling victim to the fall of TerraUSD algorithm (). Three Arrows invested $200 million in a $1 billion sale of – sister coin of . All funds are transferred to Foundation Guard – an asset reserve fund designed to support the exchange rate of the UST to the US Dollar. When UST and collapsed, the hedge fund's holdings were wiped out shortly thereafter. Co-founder Kyle Davies said the company could bear the loss at the time.

Why at this time?

The motive behind the Three Arrows withdrawal is currently unclear. StETH is issued by staking pools like Finance in exchange for , but can only be redeemed between 6 and 12 months after the network switch from POW to . The exception is using Curve, where there is a liquidity pool to trade between stETH and ETH, which has become unbalanced with more stETH ETH.

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By withdrawing from Curve, 3AC could be willing to borrow ETH against stETH's own collateral in order to qualify for a new token airdrop from the potential fork. . Otherwise, it will be necessary to wait until stETH can be exchanged for ETH after the Merge event.

Previously, it dumped stETH into Curve after the price started trading heavily against ETH. At the time of writing, stETH is active at 0.95 ETH on the exchange .

Source: TradingView

Opening Wrapped ETH will change the balance of ETH in the wallet, making the company eligible for the airdrop of the corresponding new fork token.

But it's also possible the company is liquidating wETH, and as part of liquidation proceedings, by order of a British Virgin Islands court.

In August, a Singapore court granted Teneo, 3AC's liquidator, access to the company's financial records to shed light on the location and availability of any remaining funds. These crypto assets that were previously used to provide liquidity may form part of the residual asset.

As of April this year, Three Arrows has $3 billion in assets under management, but faces claims from creditors who are big names in the crypto industry, including Genesis Global Trading, recently. filed a $2.4 billion claim against the company. Three Arrows also borrowed $687 million from bankrupt crypto broker Voyager.

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Consequences of stETH losing its peg

Twitter account Defiyst shared about the total amount of assets supporting WETH.

Accordingly, although it has decreased from 62% (August 2022), but stETH still accounts for about 55% of collateral for WETH. This is still a high number and any move in stETH could lead to massive liquidations.

Depositing stETH into lending platforms (), then borrow ETH (or WETH) to increase the snapshot balance can be seen as the implementation of an ETH short with stETH as collateral. This means that users who implement this strategy may be automatically liquidated if stETH plummets.

According to data from DeFiLlama, there is currently around $131 million worth of stETH that could be liquidated if the asset falls to $ 1,337.

However, if there are strong declines, it is likely that there will be some buying pressure as stETH is still backed by the corresponding amount of ETH staked in the Ethereum 2.0 contract.