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The changes were necessitated by the depegging incident involving Renzo’s liquid restaking token ezETH, which temporarily deviated from the price of Ether.
Renzo, a liquid restaking platform, has announced changes to its airdrop allocation and token distribution strategy. These moves come in response to mounting community outrage and the temporary depeg of its liquid restaking token – ezETH.
The protocol has increased its airdrop allocation from 5% to 7% of its tokens in the first season. This adjustment aims to distribute a larger portion of tokens to eligible participants, with 7% of the tokens being allocated in the initial phase, which goes live at the end of the month, and 5% in subsequent phases. In total, 12% of the 10 billion token supply is earmarked for user airdrops.
Renzo, the second-largest liquid restaking protocol with over $3 billion in total value locked (TVL) according to DefiLlama, has also strategically rescheduled its claim date to April 30th. This move is timed an hour before the protocol’s incoming token REZ listing on the Binance exchange, an event that has already garnered interest and attention from the crypto community.
The ezETH Depegging Incident: Causes and Consequences
The changes were necessitated by the depegging incident involving Renzo’s liquid restaking token ezETH, which temporarily deviated from the price of Ether (ETH). This incident was likely caused by users who wanted to reclaim their ETH and use it on other liquid restaking platforms. As a result, a sell-off occurred, driving down the value of ezETH to as low as $2600 as seen on PYTH Network’s data on TradingView while some data tracker revealed it dipped to around $700.
To prevent community members from violating regulations and engaging in activities that could impact the overall team, the platform disqualified airdrop farmers who had taken part in looping. Through this process, platform members sold their ezETH for ETH and then redeposited it into the protocol to earn additional rewards. As a result, users started selling large amounts of ezETH, which made the depeg situation even worse.
The selling of ezETH got more brutal by the limited availability of buyers and sellers on the blockchain, causing the value of the token to decrease rapidly. This resulted in a series of forced sell-offs, which led to losses of more than $50 million for individuals who had used leverage when trading ezETH. These losses show the potential risks involved in using leverage for trading strategies.
Trader Makes Profit Amidst Depeg
However, amidst the depeg situation, a trader managed to capitalize on the situation. According to an on-chain analyst on X, Lookonchain, a crypto trader with the handle czsamsunsb.eth made a profit of 121.65 ETH, worth over $396,000, in just two hours after Renzo’s depegging incident.
czsamsunsb.eth made 121.65 $ETH in just 2 hours after $EZETH(Renzo Restaked ETH) depegged!
He spent 4,099 $ETH to buy 4,221 $EZETH successfully, making 121.65 $ETH!https://t.co/niluIilTRi pic.twitter.com/hnPWt0DjZD
— Lookonchain (@lookonchain) April 24, 2024
Overall, there are positive indications of recovery in the price of ezETH, as it has risen to around $3000, reflecting an increase of approximately 15% from yesterday’s drop.
