The cryptocurrency market’s ongoing turmoil took a sharp turn on June 15, 2022, as Lido Finance’s Staked Ethereum (stETH) suffered a dramatic depeg from its intended 1:1 ratio with Ether, shedding as much as 8% of its value against ETH. The catalyst? None other than Three Arrows Capital (3AC), one of the most prominent crypto hedge funds in the space, which was caught dumping millions of dollars worth of stETH across multiple wallets in what appears to be a desperate attempt to cover mounting debt obligations.
TL;DR
- stETH depegged by a record 8% from ETH on June 13, according to Dune Analytics data
- Three Arrows Capital withdrew 80,000 stETH from Aave and converted approximately 38,900 stETH ($45 million) into ETH
- 3AC co-founder Zhu Su broke silence on June 15, stating the firm is “committed to working this out”
- Alameda Research also dumped nearly 50,000 stETH amid the market panic
- stETH’s depeg raised fundamental questions about the fragility of DeFi’s liquid staking ecosystem
How the stETH Depeg Unfolded
Staked Ethereum, or stETH, is a token issued by Lido Finance that represents ETH locked in the Beacon Chain staking contract. Under normal conditions, stETH trades at or near parity with ETH, as each token is redeemable on a 1:1 basis once Ethereum’s Merge completes. However, the market turbulence triggered by Celsius Network’s June 13 decision to freeze all withdrawals sent shockwaves through every corner of the crypto ecosystem.
According to Dune Analytics data, stETH slipped from its long-held peg starting June 9, with the decline accelerating dramatically on June 13 when the token dipped as low as 0.89 ETH — an 11% discount to its theoretical value. By June 15, the depeg had settled around 8%, still a staggering gap for what was supposed to be a stable derivative instrument.
Lido Finance attempted to reassure holders, tweeting that “DEX prices do not impact a holder’s ability to redeem ETH on a 1:1 basis” and emphasizing that stETH remains backed 1:1 by staking deposits. But for investors needing immediate liquidity, the message offered little comfort — selling on decentralized exchanges meant accepting a significant haircut.
Three Arrows Capital’s Massive stETH Sell-Off
On-chain analysis revealed that a wallet associated with Three Arrows Capital withdrew 80,000 stETH from the lending protocol Aave on June 14. The fund then systematically converted roughly 38,900 stETH into ETH across multiple transactions, totaling approximately $45 million at prevailing prices. Crypto trader MoonOverlord was among the first to flag the activity, noting that 3AC was “dumping on every account and seed round address they have.”
“People think Celsius is the biggest stETH dumper, but it’s 3AC and it isn’t relatively close,” MoonOverlord wrote on Twitter. “Most looks like it’s going to pay back debts and outstanding borrows they have.”
The selling pressure from 3AC was compounded by Alameda Research, the trading firm associated with FTX, which reportedly dumped nearly 50,000 stETH of its own. The combined liquidation event created a cascading effect across DeFi protocols, as the falling stETH price triggered margin calls and further forced selling.
Zhu Su Breaks His Silence
After days of speculation fueled by his social media silence — including removing crypto-related tags from his Twitter bio and deleting his Instagram — 3AC co-founder Zhu Su finally addressed the rumors on June 15. In a brief tweet, he stated: “We are in the process of communicating with relevant parties and fully committed to working this out.”
The statement did little to calm markets. Three Arrows Capital, which managed an estimated $10 billion at its peak, was one of the largest backers of the Terra ecosystem and held significant positions across dozens of crypto projects. The firm had recently led a $20 million funding round for DEX platform Orderly Network on June 9 and invested $2.5 million in data analytics firm Laevitas — raising questions about how quickly the fund’s financial position deteriorated.
Why the stETH Depeg Matters for Altcoins and DeFi
The stETH depeg exposed a critical vulnerability in the DeFi ecosystem’s reliance on liquid staking derivatives. stETH has become one of the most widely used collateral assets across lending protocols like Aave, Compound, and MakerDAO. When its value decoupled from ETH, it triggered a cascade of liquidations and margin calls that rippled through the entire decentralized finance stack.
For altcoin investors, the implications are significant. The depeg demonstrated that even “safe” DeFi instruments can experience extreme volatility during market stress, undermining the narrative that liquid staking derivatives offer a risk-free way to earn yield on staked assets. Ethereum itself was trading at approximately $1,233 on June 15, down dramatically from its November 2021 highs near $4,800, while the broader altcoin market suffered even steeper losses.
The fallout from the stETH crisis also highlighted the interconnected nature of crypto institutions. With Celsius, 3AC, and potentially other major players facing liquidity crunches simultaneously, the risk of a systemic contagion event became very real. Bitcoin hovered near $22,573, having touched lows around $21,000, while the Crypto Fear and Greed Index plunged to 11 — a level of extreme fear not seen since the March 2020 COVID crash.
Why This Matters
The stETH depeg of June 2022 represents one of the most significant stress tests for DeFi’s liquid staking infrastructure. It revealed that the ecosystem’s reliance on a few large holders — and the interconnected debt obligations between major institutions — can create systemic risks that propagate far beyond any single protocol or token. For anyone holding altcoins or DeFi positions, the events of mid-June served as a stark reminder that market contagion can reach even the most seemingly stable corners of the crypto world.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Cryptocurrency investments carry significant risk. Always do your own research before making investment decisions.
8% depeg on stETH was the moment everyone realized liquid staking had counterparty risk they never priced in
the depeg was the canary in the coal mine for the entire 2022 contagion. once stETH broke from ETH the cascade through Aave and Celsius was inevitable
liquid_risk_ the depeg was the canary. once stETH broke from ETH by 8% every DeFi protocol that used it as collateral had to reprice risk overnight. cascade was inevitable
3AC pulled 80,000 stETH from Aave. Alameda dumped 50,000. When the whales flee you know things are bad
lol Zhu Su saying committed to working this out while actively dumping positions. classic
38,900 stETH converted to ETH while publicly saying committed to working this out. the on-chain data does not lie
Zhu Su on twitter saying committed to working this out while the wallet was actively dumping was one of the most transparent lies in crypto history. on-chain dont lie
Zhu Su tweeting ‘committed to working this out’ while wallets were actively draining is why I trust block explorers over CEO statements. every single time
watching 3ac pull 80k steth from aave and dump it in real time on dune was surreal. the bank run happened onchain
steth_survivor_ watching it unfold on dune in real time was the moment a lot of us realized defi transparency cuts both ways. you could see the bank run happening and still not get out fast enough
8 percent depeg on stETH and Celsius was still telling customers everything was fine. the on-chain data was publicly screaming while the CEO posted about stability
8 percent depeg on steth while alameda dumped another 50k. two giants falling at the same time, contagion was inevitable
zhu su tweeting committed to working this out while his wallets were emptying onchain. classic ceo behavior
the 8% depeg was the signal that separated informed DeFi users from bag holders. anyone who understood liquid staking mechanics got out before the cascade hit Celsius
Alameda dumping 50K stETH on top of 3AC pulling 80K from Aave. the liquid staking ecosystem was not designed for correlated whale exits
Norbert R. correlated whale exits is the perfect description. 3AC pulling 80K and Alameda dumping 50K in the same week was a bank run on stETH liquidity
steth_dump_tracker 3AC pulling 80K from Aave while Alameda dumped another 50K in the same week. two whales exiting the same illiquid pool at once is what caused the depeg to stick
Alameda dumping 50K stETH while 3AC pulled 80K from Aave. two of the biggest whales hitting the exits on the same illiquid pool in the same week. the 8% depeg was almost modest given that
two whales hitting the same illiquid exit in one week and steth only slipped to 93 cents. today’s liquidity would not survive that flow
watching the stETH discount widen on Curve in real time was the moment I pulled everything from Celsius. on-chain data was 48 hours ahead of the official ‘we’re fine’ tweet
80,000 stETH pulled from Aave and people were still arguing the depeg was temporary. the curve pool was screaming otherwise for days
Pavel R. the curve pool ratio was flashing red for 72 hours before anyone in the discord noticed. on-chain data was right there the whole time
The Curve ratio was public for days before the discord noticed. On-chain transparency only works if somebody actually looks at it.
Looking was only half the problem. Even the people watching the Aave wallet drain 80,000 stETH all tried the same illiquid exit at once. Transparency showed the queue forming and nobody could get out anyway
the court filings later showed 3ac was sitting on a gbtc position they could not unwind. the steth dumps were them plugging holes in a boat that was already at the bottom