ezETH depeg puts ETH rally volatility in spotlight

Renzo's ezETH Liquid Recovery Token (LRT) saw a dramatic drop this week, losing over 7% of its peg to Ether (eth) in a matter of hours, with around 50% unpegging in some decentralized applications. This decline was further intensified by the liquidation of leveraged yield farmers using ezETH as collateral for subprime loans and thrust liquid recovery market volatility into the spotlight, according to the latest edition of “On-chain Insights ” by IntoTheBlock.

On April 24, ezETH recorded a record trading volume of $1.5 billion as market participants reacted to liquidations and the resulting panic and uncertainty. While some in the crypto community view depeg scenarios with trepidation, Renzo has confirmed that ezETH remains fully backed by eth.

Additionally, IntoTheBlock highlights that Renzo's team has announced plans for three audits and is preparing the protocol for ezETH swaps for the underlying eth by May. Additionally, they have increased the initial airdrop supply from 5% to 7% in an effort to stabilize community sentiment.

Although the recovery market has been shaken, the underlying protocol is expected to recover from this major disruption. Meanwhile, EigenLayer, a protocol that enables the creation of ethereum-secured applications, has surpassed $15 billion in total value locked (TVL) in less than a year. EigenLayer continues to attract deposits, and anticipation builds for its upcoming token launch.

Nearly 4% of the entire eth supply and 40% of the LRT supply are currently being reinvested into EigenLayer. Users have the option to deposit directly or through an LRT, which manages the assets on their behalf. The LRT landscape is competitive, with over $10 billion, or two-thirds of EigenLayer deposits, coming from these tokens.

EtherFi has maintained the lead in deposits, while Renzo has quickly risen to second place by expanding its decentralized finance presence, especially on layer 2 blockchains.

However, the recent announcement of Renzo's REZ governance token has caused unexpected fluctuations in ezETH prices. A controversial pie chart detailing token distribution sparked criticism and confusion on social media, contributing to selling pressure on ezETH and its subsequent discount relative to eth holdings.