Renzo's ezETH Crashes 18.3%, Down 80% to ETH; Trades 3% Below Peg

Renzo's ezETH, a cryptocurrency soft-pegged to Ethereum with a market cap of $3 billion, experienced a significant depegging, dropping 18.3% following a tokenomics announcement. The depegging led to cascading liquidations across multiple protocols, resulting in bad debt and highlighting challenges in pricing pegged assets. Despite every ezETH being backed by an Ethereum, which earns yield in Eigenlayer, ezETH briefly crashed down 80% relative to Ethereum and is still trading at a 3% discount. The incident saw $500 million in liquidity routed through the ezETH/ETH composable stable pool in a single day, which was crucial for facilitating liquidations. Large sell walls of 1770 ETH and significant liquidations have further impacted the market, preventing ezETH from re-pegging effectively, with only 400 ETH in buy orders remaining.