Staked Ethereum is One of the Biggest Losers During Terra Collapse

Staked Ethereum might have suffered equally as the other major cryptocurrencies

Staking is a far more sustainable means to validate blockchains than mining through banks of energy-sucking crypto mining rigs. Ethereum staking and staked ETH tokens are some of the most resourceful sources of income from the crypto market. Staked Ethereum is a token from the Lidp protocol which is supposed to be traded at a price that is closer to Ethereum. But quite similar to all other cryptocurrencies, including Ethereum, the market value of staked Ethereum also tumbled during the massive Terra collapse. Since the collapse of Terra LUNA, staked Ethereum (sETH) started trading at a highly discounted price, which directly indicates that the liquidity of the crypto market has shrunk to a great extent.

Currently, the investors are gearing up for the big Ethereum upgrade. More and more investors are moving to stake in the ETH 2.0 network, which is already live. There are several benefits of staking Ethereum. It not only enables the investors to earn great rewards in a passive way but since the value of the ETH 2.0 tokens will be much higher than the existing tokens, sETH users will then be subjected to much greater value in the future. Recently, reports have revealed that staked Ether and traded Ether traded equally until May 7. Since Terra's stablecoin partner UST started to tumble from its dollar peg, sETH has been plummeting too and has been unable to recover its previous values. Investors anticipate that one of the major reasons for this massive downfall of the staked Ethereum is mainly based on the fact that LUNA's collapsing economy scared away investors, and since then there have been fewer activities on the network. Once the bearish market trends cease, Ethereum will surge and so will sETH.

The Fall of Terra LUNA

The relaunch of the Terra blockchain witnessed quite a dull welcome by the crypto community. Even though the real reason behind this is still obscure, it is being speculated that investors are having a hard time trusting the new protocol, and also any innovation initiated by Do Kwon will accompany his reputation including several frauds and tax evasion charges. The original blockchain has been renamed Terra Classic, while LUNA which plunged to almost zero was renamed LUNA Classic. This new protocol will not include a stablecoin.

The Terra blockchain, was earlier known as the robust platform that supported several decentralized applications that allow users to exchange cryptos and earn yields. But within a period of 2 days, the Terra blockchain was halted twice. As UST de-pegged from its original dollar peg, it brought down the entire LUNA ecosystem with it. Not only did this bring down the market value of the entire crypto market, wiping out most of the investors' wealth, but it also wiped away investors' trust in the decentralized assets. From a broader perspective, since the entire crypto market is based on investor sentiment, losing their trust might not be the right way to proceed.

The Declining Value of sETH

Crypto expert Walter Teng enunciated that the low trading price of the staked Ethereum was mainly the result of low liquidity which emerged during the implosion of the UST stablecoin which eventually resulted in the tightening of the macroeconomic infrastructure. But gradually, as the date for the launch of the ETH 2.0 upgrade is coming up, more investors are joining the Merge network to make Ethereum staking more profitable. But there are still lingering questions about the further delay of the upgrade, which might definitely make this worse for both Ethereum and sETH.