Finance

Everyone knows, or thinks they know, the advice of Warren Buffett to investors: that “they should try to be fearful when others are greedy, and greedy when others are fearful.” After a week in which share prices in America plunged firmly into bear-market territory (defined as a fall of 20%-plus from a recent peak), some will be starting to wonder whether there is enough fear in the air to warrant their being greedy. How attractively are shares now priced? One approach is to use the equity risk premium as a guide. A rough-and-ready version of it suggests that it is not obviously a time for would-be Buffetts to swoop in. Equities are not (yet) priced at fearful levels. An opportunity for greed may yet arise. But the circumstances will be such that only the steeliest of investors can take advantage.Start with some definitions. Stocks are riskier than bonds. Owning shares should come with a reward for bearing the additional uncertainty about returns. This reward is the equity risk premium. Historically it has been handsome, particularly in America. Between 1900 and 2021 the excess real return of stocks over bonds in America was 4.7% a year, on average, according to the Credit Suisse Global Investment Returns Yearbook, compiled by Elroy Dimson, Paul Marsh and Mike Staunton, three academics.That is nice to know. But what investors care about is prospective returns. Yields to redemption are the obvious measure of the expected returns on bonds. The higher the yield, the greater the expected return. By a similar logic, the earnings yield (ie, the inverse of the share-price-to-earnings ratio) is a decent guide to expected return on equities. The gap between the earnings yield and long-term bond yields provides a forward-looking measure of the equity risk premium for long-horizon investors. The higher this premium, the keener investors should be to buy stocks over bonds.The chart shows a crude measure of the equity risk premium: the excess of the earnings yield on the s&p 500 index of shares over the yield on ten-year inflation-protected Treasuries. The latter yield is a gauge of long-term real interest rates and so is a proxy for prospective risk-free returns for a long-term investor. The risk premium varies over time, because people’s risk appetite varies with the circumstances. During the dotcom boom of the late 1990s, for instance, the equity risk premium was negative. Another salient feature is the severe spikes in the premium during periods of extreme stress, such as the Great Recession in 2008-09 and the euro-zone crisis of 2011-12.The current reading is broadly in line with the average over the past two decades. It is also little changed from the start of the year. A couple of implications follow from this. First, the bear market has been largely warranted by the sharp rise in expected interest rates now embedded in real bond yields. Share prices have fallen, but the equity risk premium has been broadly constant. You might say that not much has changed with regard to the attractiveness of American shares. That would not be quite right. It would be truer to say that equity prices are now based on more realistic expectations of future interest rates.A second implication is that equity investors are not especially fearful—or, at least, their worst fears are not reflected in share prices. For now recession is a forecast. It is not yet a reality. History suggests that in recessions American share prices fall even more sharply than they have this year. Panic usually sets in. And a panic is often a good buying opportunity. Should such an opportunity arise again, though, do not imagine that it would be easy to take advantage of. It takes nerve to buy when markets are plunging. You can always convince yourself that an even better opportunity is around the corner. Delay always seems advisable. And delay often ends up meaning not making a decision at all. The opportunity is missed. Perceptive readers will sense a familiar conclusion coming: that market timing is a snare. In this regard, it is worth thinking about Mr Buffett’s quote in full. It is only “if they [investors] insist on trying to time their participation in equities,” he said, that they should try to be greedy when others are fearful. Mr Buffett was cautioning against a “start-and-stop” approach to the stockmarket, which often leads to investors missing out on returns. There are worse times to buy stocks than after a big fall. But for most temperaments, buying and holding for the long haul is usually the best policy.■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

Check out the companies making headlines before the bell:
Kellogg (K) – Kellogg jumped 8.1% in premarket trading after announcing plans to split into three separate public companies. One entity will comprise the snack and international cereal businesses, another the U.S. cereal business and the third will be a pure-play plant-based food producer.

Lennar (LEN) – The home builder reported an adjusted quarterly profit of $4.69 per share, beating the $3.96 consensus estimate, with revenue that also topped forecasts. However, the company said it began to see the impact of higher interest rates and rapidly appreciating home prices toward the end of the quarter.
Spirit Airlines (SAVE) – Spirit rallied 8.1% in premarket trading after JetBlue (JBLU) increased its takeover offer for Spirit by $2 to $33.50 per share. Spirit plans to decide by the end of the month whether to stick with its deal to merge with Frontier Group (ULCC) or to accept JetBlue’s bid. JetBlue rose 1.6%.
Mondelez (MDLZ) – Mondelez is buying energy bar maker Clif Bar & Co. for $2.9 billion with additional payouts possible depending on financial results. The transaction is expected to close during the third quarter.
Valneva (VALN) – Valneva shares soared 81.8% in the premarket after Pfizer (PFE) agreed to buy an 8.1% stake in the French vaccine maker for more than $95 million. Pfizer and Valneva are already joint venture partners in developing treatments for Lyme disease.
Tesla (TSLA) – Tesla added 3.2% in premarket action after CEO Elon Musk gave more details on the planned job cuts announced earlier this month. Musk told Bloomberg the company would cut salaried staff by about 10% over the next three months, resulting in an overall reduction of about 3.5%.

Twitter (TWTR) – In the same Bloomberg interview, Musk said there are still some unresolved matters regarding his deal to buy Twitter, including information about spam accounts and finalizing the deal’s financing. Meanwhile, a new SEC filing from Twitter recommends shareholders vote in favor of Musk’s $54.20-per-share takeover bid. Twitter added 1.2% in the premarket.
Exxon Mobil (XOM) – Exxon Mobil was upgraded to “outperform” from “neutral” at Credit Suisse, which pointed to Exxon’s investments in attractive oil and gas projects. Exxon Mobil added 2.6% in premarket action.
Sunrun (RUN) – The solar power company’s stock rose 2.5% in premarket trading after Goldman said Sunrun remained the best way to invest in residential solar growth. Goldman rates Sunrun “buy” while it downgraded rival SunPower (SPWR) to “sell” from “neutral.” SunPower slid 2.7%.
Charles Schwab (SCHW) – The brokerage firm was upgraded to “buy” from “neutral” at UBS, which called Schwab a quality name well insulated from credit and market risk. Schwab jumped 3.3% in premarket trading.

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Musk is seeking to buy Twitter for $44 billion, a mega acquisition with huge implications for the social media world.
The fate of the deal has become more uncertain in recent weeks after Musk threatened to walk away, citing concerns over fake accounts.
On Tuesday, Musk said there were three “unresolved matters” that will need solving before he can move forward with the takeover.

In this photo illustration, Twitter account of Elon Musk is seen on a smartphone screen and Twitter logo in the background.
Pavlo Gonchar | Lightrocket | Getty Images

Elon Musk says there are three main hurdles to overcome before he can complete his purchase of Twitter.
Musk is seeking to buy Twitter for $44 billion, a mega acquisition with huge implications for the social media world — not least given the Tesla and SpaceX CEO’s contentious stance on content moderation and freedom of speech.

But the fate of the deal has become more uncertain in recent weeks after Musk threatened to walk away, citing concerns over the number of fake accounts on the platform. The billionaire could face a $1 billion breakup fee and possibly even lawsuits if he were to abandon the deal.
Speaking at an event hosted by Bloomberg Tuesday, Musk said there were a number of “unresolved matters” that will need solving before he can move forward with the takeover.

1. Fake accounts

Musk has made no secret of his concerns over the number of fake accounts on Twitter. Attempts to manipulate social media platforms with fake accounts and bots aren’t exactly new, but Musk says he wants more clarity from Twitter on how many of its users are genuine.
Public disclosures from Twitter place the number of false or spam accounts at less than 5% of its “monetizable” daily active users. Musk is doubtful. On Tuesday, he said it’s “probably not most people’s experience when using Twitter.”
“We’re still awaiting a resolution on that matter, and that is a very significant matter,” he said.

Last week, Bret Taylor, Twitter’s independent board chair, said company management remained “committed to the transaction under the agreed upon terms.”

2. Debt financing

The second major roadblock facing the Twitter transaction, according to Musk, is the portion of debt required to finance it.
Musk in May committed to paying $33.5 billion in cash for the company. He has also received $7.1 billion in equity financing commitments from investors including Oracle co-founder Larry Ellison and the crypto exchange Binance.
Musk says the remainder of the funding will come in the form of bank loans, but how exactly this will play out remains uncertain. Despite being the world’s richest man, much of Musk’s wealth is tied up in Tesla stock. He has sold and pledged billions in Tesla shares as collateral for the loans.

3. Shareholder approval

The final hurdle for Musk to clinch his acquisition is approval from Twitter’s shareholders. Investors are expected to vote on the deal in late July or early August.
Whether or not Musk will get enough shareholder support for the buyout remains unclear. Last month, some Twitter shareholders sued Musk and the company itself over the chaotic handling of the process.
“Will the debt portion of the round come together? And then will the shareholders vote in favor?” Musk said Tuesday.
These — along with the issue of fake accounts — are “the three things that need to be resolved before the transaction can complete,” he added.

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The U.S. Federal Reserve, European Central Bank, Swiss National Bank and the Bank of England all moved to varying degrees to rein in inflation last week.
“One thing is clear: if there is a sudden stop of Russian gas, the likelihood of a recession coming sooner is obviously far higher. There is no doubt,” Sewing told CNBC’s Annette Weisbach exclusively on Monday.

Europe and the U.S. face a high likelihood of recession as central banks are forced to aggressively tighten monetary policy to combat inflation, according to Deutsche Bank CEO Christian Sewing.
The U.S. Federal Reserve, European Central Bank, Swiss National Bank and the Bank of England all moved to rein in inflation last week, albeit to varying degrees.

Consumer price inflation in the euro zone hit a fresh record high of 8.1% in May and the ECB has confirmed its intention to begin hiking interest rates at its July meeting.
Central bank leaders and economists around the world have acknowledged that the aggressive tightening that may be necessary to rein in inflation could risk tipping economies into recession, with growth already slowing due to a confluence of global factors.

A Deutsche Bank AG flag flies outside the company’s office on Wall Street in New York.
Mark Kauzlarich | Bloomberg | Getty Images

Europe’s proximity to the war in Ukraine and its reliance on Russian energy imports render the continent uniquely vulnerable to the conflict and a potential stoppage of Russian gas flows.
“One thing is clear: if there is a sudden stop of Russian gas, the likelihood of a recession coming sooner is obviously far higher. There is no doubt,” Sewing told CNBC’s Annette Weisbach in an exclusive interview.
“But I would say that overall, we have such a challenging situation that the probability of a recession also in Germany, or in Europe in 2023 or the year after, is higher than we have seen it in any of the previous years, and that is not only the impact of this awful war, but look at the inflation, look at what that means for monetary policy.”

Along with inflation stemming from the war in Ukraine and associated sanctions on Russia, supply chains have also been stymied by resurgent post-pandemic demand and a return of Covid-19 control measures, most notably in China.
“That is such a challenging situation that we have three, four drivers which can severely impact the economy, and all of that coming together in one and the same time means that there is enough pressure and a lot of pressure on the economy, and hence the likelihood of a recession coming into Europe, but also in the U.S., is quite high,” Sewing said.

Sewing: Inflation ‘really worries me most’

Given this confluence of challenges, Sewing said he is increasingly reluctant to rely on traditional models as the economy faces a “perfect storm” of “three or four real levers which can cause, at the end of the day, a recession.”
Sewing said inflation was the biggest concern, however.
“I would say that the inflation is something that really worries me most and therefore I do think that the signal which we got from the central banks, be it the Fed but now also the ECB, is the right signal,” he said.
“We need to fight inflation because at the end of the day, inflation is the biggest poison for the economy.”

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Traders on the floor of the NYSE, June 16, 2022.
Source: NYSE

Stock futures rose in overnight trading Monday following a brutal week as investors assessed a more aggressive Federal Reserve and rising chances of a recession.
Futures on the Dow Jones Industrial Average jumped 380 points, or around 1.3%. S&P 500 futures climbed 1.12% and Nasdaq 100 futures also rose 1.14%. U.S. stock markets were closed earlier Monday for Juneteenth.

The major averages just suffered their 10th losing week in 11 on fears that the central bank will hike rates aggressively to tame inflation at the risk of causing an economic downturn. The S&P 500 dropped 5.8% last week for its biggest weekly loss since March 2020, dipping deeper into bear market territory. The equity benchmark is now more than 23% off its record high from early January.
The blue-chip Dow slid 4.8% last week, falling below 30,000 for the first time since January 2021 last week. The tech-heavy Nasdaq Composite slipped 4.8% last week, down 33% from its record high.
“The recent drop in equity markets and inflection in investor attitudes make a bottoming thesis more difficult to make,” said Nationwide’s chief of investment research, Mark Hackett. “Investors are acting emotionally, but the fundamentals are beginning to follow the weakness in the technicals.”
Fed Chair Jerome Powell will testify before Congress Wednesday and Thursday. His appearance comes after a recent rate hike by three-quarters of a percentage point, the central bank’s biggest increase since 1994.
Investors will monitor incoming data, including existing home sales on Tuesday, to gauge the health of the economy. Recent data showing low consumer confidence, falling retail spending and a cooling housing market have fueled recession fears as the Fed battles inflation at 41-year highs.
Meanwhile, cryptocurrencies continued their roller-coaster ride. Bitcoin fell to a new 2022 low of $17,601.58 over the weekend before climbing back above the $20,000 mark on Monday. The world’s largest cryptocurrency by market cap sits 70% below its all-time high hit in November.

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Faced with public uproar about the cost of living, policymakers like to point out that rising prices are a global phenomenon. “Every country in the world is getting a big bite and piece of this inflation,” said President Joe Biden on June 10th, after America reported its biggest bite since 1981 (consumer prices rose by 8.6% in May, compared with a year earlier).It is true that the cost of fuel, fertiliser, grains and other commodities rose everywhere after Russia invaded Ukraine in February. But not everywhere has its mouth full of inflation. Of the 42 big economies featured in the indicators page of The Economist, eight still have inflation below 4%. Six of those eight are in East or South-East Asia (see chart). The region also includes some smaller oases of price stability, such as Vietnam (where inflation was 2.9% in the year to May) and Macau (1.1% in the year to April).What accounts for this Eastern exceptionalism? Part of the explanation lies in the spread of two diseases. An outbreak of African swine fever from 2018 to 2021 devastated the pig population in China, where as many as 200m pigs were culled, according to some estimates. This dramatically increased the price of pork, a food staple in East Asia. The price has subsequently fallen back sharply. In mainland China, for example, the price of pork fell by more than 21% in the year to May. This helped offset inflationary pressures elsewhere in the economy. (It also helps that East Asia, unlike other parts of the world, eats more rice than wheat. The price of rice has risen by 8% since Russia’s invasion of Ukraine, whereas wheat prices have increased by 17%.)The other anti-inflationary disease in the region is covid-19. Many parts of Asia turned to living with the virus more slowly and reluctantly than in the West. Indonesia, for example, did not entirely abandon quarantine for international arrivals until March 22nd. In Malaysia, travel and movement did not return to normal until early May, a full month after the country officially entered its “transition to endemic” phase, according to an index of social restrictions developed by Goldman Sachs, a bank. Taiwan remains cautious even now. Its success in keeping covid at bay in the past has left its population with little natural immunity and less of the West’s fatalism about the disease.China, of course, continues to impose stringent restrictions on people’s movement and gathering wherever infections appear. The recent lockdowns in Shanghai and elsewhere hampered both the economy’s ability to supply goods and its consumers’ willingness to buy them. This twin disruption to supply and demand could in theory move prices either way. But the damage to consumer spending seems to be more severe and persistent. In May, the second month of Shanghai’s lockdown, retail sales fell by almost 10% (in real terms) compared with a year earlier, even as industrial production rose by 0.7%.Limits on cross-border travel have been devastating to the economies of Hong Kong and especially Macau, which relies on visitors from the mainland to fill its casinos. Indeed, Macau’s gdp in the first three months of this year was less than half the size it reached in the same months of 2019. In that context, inflation of 1% does not seem so miraculous. Indeed, it is a wonder that prices are rising at all.In the West, high inflation has forced many economic policymakers to turn hawkish. America’s Federal Reserve, for example, felt compelled to raise interest rates by 0.75 percentage points on June 15th, faster than planned. The Fed’s new haste to combat inflation is complicating East Asia’s fight against the same foe. Higher interest rates in America attract global capital flows, putting downward pressure on Asia’s currencies. Hong Kong, which has pegged its currency to the American dollar, and Macau, which has pegged its currency to Hong Kong’s, were obliged to raise interest rates the day after the Fed did so. Malaysia and Taiwan have also raised interest rates already this year and Indonesia, where interest rates are 3.5%, is forecast to increase them next month, according to JPMorgan Chase, a bank. Malaysia and Indonesia have also experimented with a less orthodox response to rising prices: export bans. Indonesia briefly prohibited the overseas sale of palm oil and Malaysia retains an export ban on live chickens. The aim is to reserve all of the country’s supply for its own people. But the policies can backfire if lower prices prompt local farmers to cut back on production. Such bans also exacerbate inflation elsewhere in the region. Singapore, in particular, depends on poultry imports from its larger neighbour. The pair’s economic intimacy and rivalry is coming home to roost.One exception to this tightening trend is Japan. At its meeting on June 17th, the Bank of Japan reiterated its commitment to buy as many ten-year government bonds as necessary to keep their yields to no more than 0.25%. It resolved to stick to this ceiling, even as the equivalent yields in America have risen sharply to over 3.2%. This yield gap has contributed to a plunging yen, which has fallen to around its weakest levels against the dollar since 1998.A weak yen will push up import prices, contributing to inflation in Japan. If higher inflation persists, people will come to expect it, demanding more generous wages in compensation. Those higher wages will, in turn, push up prices, making the expectations of inflation self-fulfilling.In many parts of Asia, such a wage-price spiral is something to be feared. But in Japan, it is something policymakers have long sought. After years of weak demand and falling prices, inflation expectations had become dangerously low, making it harder for the Bank of Japan to revive the economy in a downturn and forestall a return to deflation. Like everywhere else, Japan is getting a bite of inflation. Its central bankers want to sink their teeth in even deeper. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

Solend, a lending platform built on the Solana blockchain, tried to gain control of a so-called “whale” account which it said was putting the protocol at risk.
It’s an unprecedented move in world of DeFi, which aims to recreate lending and other financial services without the involvement of intermediaries like banks.
Solend’s users have since voted to block the move.

The logo of cryptocurrency platform Solana.
Jakub Porzycki | NurPhoto via | Getty Images

Decentralized finance platforms are going to extreme lengths to limit the fallout from a sell-off in cryptocurrencies.
Solend, a lending platform built on the Solana blockchain, tried to gain control of its largest account, a so-called “whale” investor that it said could significantly influence market movements.

Solend’s users have since voted to block the move.

What is Solend?

Solend is a DeFi app that lets users borrow and lend funds without having to go through intermediaries.
Solend said a single whale is sitting on an “extremely large margin position,” potentially putting the protocol and its users at risk. “In the worst case, Solend could end up with bad debt,” the firm said. “This could cause chaos, putting a strain on the Solana network.”
The account concerned had deposited 5.7 million sol tokens into Solend, accounting for more than 95% of deposits. Against that, it was borrowing $108 million in the stablecoins USDC and ether.

If sol’s price sank below $22.30, 20% of the account’s collateral — about $21 million — is at risk of being liquidated, Solend said. Sol was trading at a price of $34.49 on Monday.

On Sunday, Solend passed a proposal granting it emergency powers to take over the whale account, an unprecedented move in the DeFi world.
Solend said the measure would allow it to liquidate the whale’s assets via “over-the-counter” transactions — as opposed to on-exchanges trades — to avoid a possible cascade of liquidations.

DeFi apps under strain

The move led to a backlash on Twitter, with some questioning Solend’s decentralization. One of DeFi’s core tenets is that it’s meant to do away with centralized institutions like banks.
By Monday, however, Solend’s users were asked to vote on a new proposal to overturn the earlier vote. The community overwhelming voted in favor, with 99.8% voting “yes.”
The debacle is a sign of how DeFi — a kind of “Wild West” where users take it on themselves to conduct trades and loans peer-to-peer — has gotten caught up in the crypto meltdown.
MakerDAO, the creator of a dollar-pegged stablecoin called DAI, recently disabled a feature that allowed traders to borrow DAI against staked ether, a derivative token causing mayhem in the crypto market.
StETH is meant to be worth the same as ether, but it’s been trading at a widening discount to the second-biggest cryptocurrency. Moving in and out of stETH isn’t easy, and that’s resulted in liquidity issues at large crypto lenders and hedge funds like Celsius and Three Arrows Capital.

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Staked ether, or stETH, is a token that’s meant to be worth the same as ether.
For the past few weeks, it has been trading at a widening discount to the second-biggest cryptocurrency.
Instability in the token’s price has further constrained liquidity in the fragile crypto market.

Ether is the second-largest cryptocurrency in the world by market value.
Jaap Arriens | NurPhoto via Getty Images

Another controversial cryptocurrency is causing havoc in the digital asset market — and this time, it’s not a stablecoin.
Staked ether, or stETH, is a token that’s supposed to be worth the same as ether. But for the past few weeks, it has been trading at a widening discount to the second-biggest cryptocurrency, fanning the flames of a liquidity crisis in the crypto market.

On Friday, stETH fell as low as 0.92 ETH, implying an 8% discount to ether.
Here’s everything you need to know about stETH, and why it has crypto investors worried.

What is stETH?

Each stETH token represents a unit of ether that has been “staked,” or deposited, in what’s called the “beacon chain.”

Ethereum, the network underpinning ether, is in the process of upgrading to a new version that’s meant to be faster and cheaper to use. The beacon chain is a testing environment for this upgrade.
Staking is a practice where investors lock up their tokens for a period of time to contribute to the security of a crypto network. In return, they receive rewards in the form of interest-like yields. The mechanism behind this is known as “proof of stake.” It’s different from “proof of work,” or mining, which requires lots of computing power — and energy.

To stake on Ethereum currently, users have to agree to lock away a minimum 32 ETH until after the network upgrades to a new standard, known as Ethereum 2.0.
However, a platform called Lido Finance lets users stake any amount of ether and receive a derivative token called stETH, which can then be traded or lent on other platforms. It is an important part of decentralized finance, which aims to replicate financial services like lending and insurance using blockchain technology.
StETH isn’t a stablecoin like tether or terraUSD, the “algorithmic” stablecoin that collapsed last month under the strain of a bank run. It’s more like an IOU — the idea being that stETH holders can redeem their tokens for an equivalent amount of ether once the upgrade completes.

Decoupling from ether

When the Terra stablecoin project imploded, stETH’s price began trading below ether’s as investors raced for the exit. A month later, crypto lender Celsius started halting account withdrawals, which saw stETH’s value dropping even further.
Celsius acts a lot like a bank, taking users’ crypto and lending it to other institutions to generate a return on deposits. The firm took users’ ether and staked it through Lido to boost its profits.

Celsius has more than $400 million in stETH deposits, according to data from DeFi analytics site Ape Board. The fear now is that Celsius will have to sell its stETH, resulting in hefty losses and putting more downward pressure on the token.
But that’s easier said than done. StETh holders won’t be able to redeem their tokens for ether until six to 12 months after an event known as the “merge,” which will complete Ethereum’s transition from proof of work to proof of stake.
This comes at a price, as it means investors are stuck with their stETH unless they choose to sell it on other platforms. One way to do this is to convert stETH to ether using Curve, a service that pools together funds to enable faster trading in and out of tokens.
Curve’s liquidity pool for switching between stETH and ether “has become quite unbalanced,” said Ryan Shea, economist at crypto investment firm Trakx.io. Ether accounts for less than 20% of reserves in the pool, meaning there wouldn’t be enough liquidity to meet every stETH withdrawal.
“Staked ETH issued by Lido is backed 1:1 with ETH staking deposits,” Lido said in a tweet last week, attempting to calm investor fears over stETH’s growing divergence from the value of ether.
“The exchange rate between stETH:ETH does not reflect the underlying backing of your staked ETH, but rather a fluctuating secondary market price.”

Crypto contagion

Like many facets of crypto, stETH has been caught up in a whirlwind of negative news affecting the sector.
Higher interest rates from the Federal Reserve have triggered a flight to safer, more liquid assets, which has in turn led to liquidity issues at major firms in the space.
Another company with exposure to stETH is Three Arrows Capital, the crypto hedge fund which is rumored to be in financial trouble. Public blockchain records show that 3AC has been actively selling its stETH holdings, and 3AC co-founder Zhu Su has previously said his firm is considering asset sales and a rescue by another firm to avoid collapse.
3AC was not available to comment when contacted by CNBC.

Investors worry that the fall in stETH’s value will hit even more players in crypto.
“In crypto there is no central bank,” Shea said. “Things will just have to play out, and it will continue to weigh on crypto asset prices, compounding the negative impact from the macro backdrop.”
Bitcoin briefly sank below $18,000 a coin on Saturday, pushing deeper into 18-month lows. It’s since recovered back above $20,000. Ether at one point dropped below $900, before retaking $1,000 by Monday.

The ‘merge’

The stETH debacle has also led to fresh concerns over the security of Ethereum. About a third of all the ether locked into Ethereum’s beacon chain is staked through Lido. Some investors worry this may give a single player too much control over the upgraded Ethereum network.
Ethereum recently completed a dress rehearsal for its much-anticipated merge. The success of the event bodes well for Ethereum’s upgrade, with investors expecting it to take place as early as August. But there’s no telling when it will actually happen — it’s already been delayed numerous times.
“The latest updates on Ethereum’s testnets have been positive which brings more confidence to those waiting on the Merge,” said Mark Arjoon, research associate at crypto asset management firm CoinShares.
“So, when withdrawals are eventually enabled, any discount in stETH will likely be arbitraged away but until that unknown date arrives there will still exist some form of discount.”

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