stETH is a liquid staking derivative of ETH2 ETH. It is supposed to be pegged to ETH in terms of value, to allow the proper functioning as a staking derivative. This means, there are opportunities for opportunists to take advantage of price discrepancies to increase their stack. In this dashboard, we will look the two ways to stack more ETH, swapping ETH to stETH when stETH is at discount, the vice versa when stETH is at premium.

We will only use Curve stETH/ETH pool for this analysis. First we will look at the daily metrics as understand the consistency in data, then analyse the distribution of gain or loss across various gain percentages. Lets dive deep.

stETH to ETH

Looking at the data of stETH to ETH swaps we have, we can easily say that over the past year, there has been consistently 40+ swaps averaging 1 stETH per swap, consistently putting up 500 stETH daily volume. This is

From the graphs above, plotting cumulative gains and average gains on a daily basis, we can see most of the trading resulting in net ETH lost (assuming stETH is redeemable for 1:1 ETH in future). Between September 2021 and January 2022, we can see that there has been consistently almost 2 to 4 ETH lost.

Analysing the distribution of losses, with x-axis stating the percent of ETH gained

With x-axis as ETH gain percentage, and y-axis being number of swaps and volume of stETH sold respectively:

• Overall, selling stETH to accumulate ETH is a bad idea
• with no burn mechanism for stETH in place, redeeming the underlying ETH is more likely to result in a loss.
• Curves stableswap AMM is proabably why losses are extremely low. Even gains made are sub 0.1 percent.

ETH to stETH

Comparing to stETH to ETH swaps, ETH to stETH swaps are less frequent, however are larger in size. Total volume however is comparable to that of stETH selling.

ETH to stETH conversions have largely resulted in profits. Both the daily gains and the average gain percent staying above 0.

Analysing the distribution of losses, with x-axis stating the percent of stETH gained

With x-axis as stETH gain percentage, and y-axis being number of swaps and volume of stETH sold respectively:

• Transaction volume of ETH to stETH swaps is relatively less, as there is a mechanism in place to mint stETH from ETH at 1:1 ratio.
• Thus in general only swaps that result in stETH more than ETH is taken.
• Hence there is a bias when swapping to stETH, thus causing this distribution of extreme profitting only
• Losses when they occur are heavy, probably due to MEV attacks on bigger swap sizes.

TLDR

• Swapping stETH to ETH is most likely gonna result in loss
• minting stETH from ETH is available, hence only profitable ETH to stETH swaps are usually made
• The lack of burn mechanism creates extreme sell pressure on stETH while there is a inherent lack of buying unless an profit opportunitity occurs.
• Thanks to Curve stETH/ETH pool, stETH has managed to keep its peg with the deep liquidity created by incentives from Curve and Lido