Liquid Staking Tokens: The Risk of Depegging During Market Volatility
Liquid staking tokens (LSTs), which offer users the ability to stake assets while maintaining liquidity, face the risk of depegging during times of extreme market volatility. This occurs when the tokenâs value diverges from the underlying asset, causing discrepancies in price. While arbitrage mechanisms typically correct such issues, periods of intense market fluctuation can make it difficult to maintain price stability, posing challenges for LSTs as they grow across blockchain ecosystems.
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