Renzo Protocol’s ezETH Depeg Incident and REZ Airdrop Controversy Shake Crypto Markets

Renzo Protocol’s liquid restaking token (LRT), ezETH, encountered a depeg incident on Wednesday amidst the backdrop of the controversial REZ native token airdrop.

This occurrence led ezETH to lose its 1:1 parity with its underlying asset, Ethereum (ETH).

Concerns arose within the community due to the Renzo (REZ) airdrop allocation, adding to the turbulence surrounding ezETH. The token’s price briefly plummeted to as low as $688 on the decentralized exchange (DEX) Uniswap before showing signs of recovery.

The triggering event seems to have been a significant sell-off of ezETH following the conclusion of the season 1 airdrop on Renzo Protocol.

Tommy stressed the importance of recognizing the risk associated with ezETH’s depeg incident, emphasizing its relevance to all Liquid Restaking Tokens (LRTs).

The fallout from ezETH’s depeg led to widespread liquidations across leveraged protocols like Gearbox and Morpho Labs. This ensued as users repeatedly leveraged their LRT holdings as collateral to borrow ETH.

According to 0xmikko, founder of Gearbox, “115 Credit Accounts were liquidated, 10,650 ezETH were sold on Balancer pool. Liquidation losses of 25.77 ETH were automatically covered by internal Gearbox reserve fund, no action needed.”

Renzo currently ranks as the second-largest liquid restaking protocol, boasting a total value locked (TVL) of approximately $3.21 billion. Over the past 30 days, Renzo’s TVL has surged by about 125%, as reported by DefiLlama.

Interest in the Renzo protocol soared following Binance’s launch of the Launchpool program for its native token Renzo (REZ) on Tuesday. Holders of BNB and First Digital USD (FDUSD) now have the opportunity to stake their assets to farm REZ tokens for six days until April 29, leading up to REZ’s listing on Binance on April 30.

Renzo earmarked 10% of the total REZ token supply for the airdrop, with an additional 2.5% allocated to Binance Launchpool. However, the season 1 airdrop only distributed 5% of the total REZ token supply, resulting in the farming allocation on Renzo Protocol being merely 50% higher than that for Binance Launchpool.

More specifically, 2% of the 5% (or 0.1% of the total REZ token supply) for the season 1 airdrop was designated for Milady and SchizoPosters non-fungible token (NFT) holders.

Controversy reached its peak when Binance scheduled the end of Launchpool for April 29, with REZ token trading set to commence on April 30.


Disclaimer: Not Investment Advice

it’s crucial to understand that the information provided here is not to be construed as investment advice. The crypto market is dynamic and highly speculative, and decisions should be made based on thorough personal research and consideration of individual risk tolerance. Always consult with financial professionals and conduct your own due diligence before making any investment decisions. The intention of this exploration is to present insights and trends, not to provide specific investment recommendations.

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