- 14 Nov 2025
- Elara Crowthorne
- 0
De-Pegging Risk Calculator
How Much Could You Lose During a De-Peg?
Liquid staking tokens like stETH can trade below their expected value. Calculate your potential losses during de-peg events based on current market conditions.
Note: This calculator shows potential losses during de-peg events. Real-world losses may be higher due to:
- Slashing events
- Low liquidity on DEXs
- Regulatory impacts
Never assume your liquid staking token is at a 1:1 peg with actual ETH.
When you stake your ETH or SOL, you lock it up to help secure the network and earn rewards. But what if you could earn those rewards without locking anything up? That’s the promise of liquid staking. Protocols like Lido, Rocket Pool, and others let you swap your staked tokens for derivative tokens-like stETH or rETH-that you can trade, lend, or use in DeFi apps. It sounds too good to be true. And in many ways, it is.
Liquid staking has exploded in popularity. By late 2023, over $14 billion was locked in these protocols. But behind the convenience lies a web of hidden risks that most users never fully understand. This isn’t just about losing a few dollars in a bad trade. It’s about losing access to your assets during a market crash, watching your stETH trade at 0.95 ETH when it’s supposed to be 1:1, or having your funds frozen because a smart contract gets hacked. These aren’t hypotheticals. They’ve happened.
De-Pegging: When Your Token Stops Being Worth What It Should
The biggest fear in liquid staking isn’t hacking-it’s de-pegging. Your stETH is supposed to be worth exactly 1 ETH. But in reality, it’s just a promise. That promise can break.
During the 2022 Celsius collapse and the FTX crash, stETH dropped as low as 0.94 ETH on major DEXs. Why? Because the liquidity pools that let you swap stETH for ETH dried up. People panicked. No one wanted to buy stETH because they couldn’t be sure they’d get back full ETH value. The same thing happened on Curve Finance-pools emptied, and users were stuck.
It’s not just a flash crash. CoinGecko data shows stETH traded below 0.99 ETH more than 15 times in a six-month period. That’s not a glitch. It’s a design flaw. Liquid staking tokens aren’t pegged by magic. They’re pegged by liquidity, trust, and market demand. If any of those vanish, your token’s value follows.
And there’s no guarantee it’ll bounce back. Some users reported waiting weeks just to get their ETH back, even after the market stabilized. If you’re counting on stETH to cover an expense or fund a DeFi position, a de-peg could ruin your plan.
Smart Contract Hacks: The Invisible Threat
You’re not staking directly on Ethereum. You’re trusting a smart contract-a piece of code running on the blockchain. That code could have bugs. It already has.
Stader Labs, Ankr, and others all admit their protocols are built on smart contracts that can be exploited. Audits help, but they’re not foolproof. OpenZeppelin and Trail of Bits have audited top protocols, yet vulnerabilities still slip through. In 2023, users on Reddit and Discord reported discovering gaps in audit coverage-some protocols claimed multiple audits, but the public reports didn’t match what was actually tested.
And it’s not just about code. If a protocol’s node operators lose their private keys, or if a malicious actor gains control of the contract’s upgrade function, your funds are at risk. There’s no customer service line to call. No bank to reverse the transaction. Once the code fails, your ETH is gone-or locked forever.
Unlike traditional finance, where a bank’s insurance covers losses, DeFi has no safety net. You’re the only one responsible for checking if the code is safe. And most people don’t even know how to look.
Slashing: You Pay for Someone Else’s Mistake
When you stake ETH directly, you’re responsible for running a validator node. If it goes offline or signs conflicting blocks, you lose part of your stake-up to 1 ETH per slashing event. That’s scary, but at least you know the risk.
Liquid staking outsources that risk. But you still pay for it. If a validator in Lido’s pool gets slashed, the loss gets distributed across all stETH holders. You didn’t run the node. You didn’t make the mistake. But you still lose money.
Galaxy Research confirmed this in 2023: slashing is a “fully exposed” risk for liquid stakers. And unlike direct staking, where you can choose reliable operators, you have zero control over who runs the nodes in a pooled system. Lido alone controls about 32% of all staked ETH. That means if one of their 100,000+ validators messes up, you’re on the hook.
There’s no way to opt out. No setting to turn it off. You just accept it as part of the deal.
Centralization: The Systemic Threat to Ethereum
Liquid staking was supposed to make staking more accessible. But it’s making Ethereum less secure.
Lido dominates the market. With over $12 billion locked, they control roughly one-third of all ETH staked. That’s dangerous. Ethereum’s security relies on decentralization-if one entity controls too much of the network, it becomes a single point of failure. A hack, a regulatory crackdown, or even a bad governance vote could destabilize the entire chain.
And it’s not just Lido. Coinbase’s cbETH and Binance’s BETH are even more centralized. They’re custodial. That means those exchanges hold your keys. They can freeze your assets. They can change the rules. And if they go under-like Celsius did-you lose everything.
Even Rocket Pool, which tries to be more decentralized by requiring users to stake 8 ETH plus 2.4 ETH in RPL, still depends on a small group of node operators. The more people use liquid staking, the fewer people run their own validators. That’s a slow-motion attack on Ethereum’s core promise: decentralization.
Token Models: Rebasing vs. Reward-Bearing-And Why It Matters
Not all liquid staking tokens are the same. Some are rebasing. Others are reward-bearing. The difference affects your taxes, your accounting, and even how your wallet shows your balance.
Rebasing tokens (like some early versions of stETH) automatically increase your token balance as rewards accrue. So if you start with 10 stETH, you might end up with 10.05 after a week. Sounds simple. But your wallet doesn’t update in real time. You might think you still have 10, but you actually have more. That breaks tax software and DeFi integrations.
Reward-bearing tokens (like current stETH and rETH) keep your balance the same but increase the token’s value. So 1 stETH is worth 1.005 ETH after rewards. This is cleaner for wallets and taxes-but it’s why de-pegging hurts more. If the value drops from 1.005 to 0.98, you lose 7% of your purchasing power. And you can’t just “sell your balance” to avoid it.
Most users don’t even know which model they’re using. But if you’re filing taxes or using your LST in a yield farm, this detail can cost you hundreds-or thousands-of dollars.
Regulatory Risk: The SEC Is Watching
On August 5, 2025, the U.S. Securities and Exchange Commission issued a formal statement on “Certain Liquid Staking Activities.” That’s not a warning. It’s a red flag.
The SEC is considering whether LSTs like stETH and rETH are unregistered securities. If they are, exchanges could be forced to delist them. Protocols could be shut down. Your stETH could become untradeable overnight.
There’s no precedent for this. No legal clarity. And no way to predict what will happen. If you’re in the U.S., this isn’t just a crypto risk-it’s a legal one. Holding stETH could mean you’re holding an unregistered security. That’s not something you want to explain to a regulator.
How to Protect Yourself
There’s no perfect way to eliminate these risks. But you can reduce them.
- Diversify your LSTs. Don’t put all your ETH into stETH. Use Rocket Pool’s rETH, Origin’s OETH, or even cbETH-but spread it out. That reduces exposure to any single protocol’s failure.
- Check liquidity. Before staking, look at the trading volume on Uniswap or Curve. If the pool is shallow, avoid it. Low liquidity = high de-peg risk.
- Verify audits. Go to the protocol’s website. Look for audit reports from OpenZeppelin, Trail of Bits, or Quantstamp. If they’re missing or outdated, walk away.
- Understand your token model. Know whether you’re holding a rebasing or reward-bearing token. Use tools like DeFiLlama or Etherscan to track your actual balance and value.
- Don’t over-leverage. Never borrow against your LSTs unless you’re prepared to lose everything if the price dips. DeFi loans can liquidate you in seconds during a de-peg.
And most importantly: never assume 1:1. Treat your stETH like a volatile asset, not cash. If you need stable value, hold ETH directly. Liquid staking is a high-risk tool. Use it like one.
What’s Next?
Liquid staking isn’t going away. It’s too convenient. Too profitable. Too deeply woven into DeFi.
But the next big crash will test it harder than ever. If Lido’s governance votes to expand into riskier chains, or if a major protocol gets hacked, the fallout could ripple across the entire crypto market. Institutional players like Fireblocks are already supporting stETH, which means more money is flowing in-but also more exposure to systemic risk.
By 2025, liquid staking could represent half of all staked ETH. That’s a massive concentration of power. And power, in crypto, is dangerous.
The real question isn’t whether you should use liquid staking. It’s whether you’re ready for what happens when it breaks.
Can stETH ever lose its peg permanently?
Yes, stETH can lose its peg permanently if the underlying protocol fails, liquidity vanishes, or Ethereum’s staking mechanism breaks. While it has always recovered from past dips, there’s no guarantee it will in the future. If a major hack occurs or if regulators shut down Lido’s operations, stETH could trade at a permanent discount-or become untradeable.
Is liquid staking safer than staking directly?
No. Direct staking gives you full control and no counterparty risk. You’re only exposed to slashing and network downtime. Liquid staking adds de-pegging, smart contract, and centralization risks. It’s more convenient, but not safer. Only use it if you need liquidity for DeFi and understand the trade-offs.
What happens if Lido gets hacked?
If Lido’s smart contracts are exploited, all stETH holders could lose part or all of their staked ETH. Unlike centralized exchanges, there’s no insurance or recovery process. Your only recourse would be a hard fork or community-driven rescue-which is never guaranteed. Lido’s DAO governance might vote on a fix, but it could take weeks or months.
Are liquid staking tokens taxable?
Yes. In most jurisdictions, staking rewards are treated as income when received. For rebasing tokens, each increase in token balance may trigger a taxable event. For reward-bearing tokens, the increase in token value is taxable when you sell or trade. Many users get audited because their wallets show unexpected gains. Always track your LST transactions and consult a crypto-savvy accountant.
Can I withdraw my ETH from liquid staking anytime?
After Ethereum’s Shanghai upgrade in April 2023, withdrawals are possible-but not instant. There’s a queue for validator exits, and it can take days or weeks to get your ETH back. During high demand, the queue grows. If you need liquidity fast, you can sell your stETH on a DEX, but you risk a de-peg. You can’t rely on quick access.
Should I use Lido, Rocket Pool, or another protocol?
Lido offers the most liquidity and ease of use but carries the highest centralization risk. Rocket Pool is more decentralized but requires more ETH and technical knowledge. OETH has better peg stability but less liquidity. For most users, diversifying across two or three protocols reduces risk. Avoid custodial options like cbETH or BETH if you care about decentralization.
