Introduction
Each month, Chaos Labs delivers comprehensive, data-driven analysis of Renzo’s key metrics, ensuring full transparency for the community. By closely monitoring utilization trends, liquidity dynamics, and borrower behaviors, Chaos Labs aims to proactively identify and mitigate emerging risks to maintain protocol stability.
Performance
During July, a notable peg deviation occurred for ezETH, primarily driven by rapid liquidity events between July 16 and 23. This dislocation originated on Aave and propagated across the staking and restaking landscape.
Despite this, Renzo’s ezETH maintained a relatively stable and increasing yield. The ezETH-ETH exchange rate rose from 1.0532 to 1.0559, resulting in a realized APR of 3.14% for ezETH over the month. This demonstrates yield stability despite broader market disruptions.
During the July liquidity crunch, ezETH faced consistent depeg pressure, with the discount to ETH widening to a peak of -0.473%. This was largely triggered by stress in the stETH markets, where significant validator exits led stETH to trade below peg. Conditions improved in the final days of July and into early August, with ezETH now trading at a -0.169% discount.
Amid the broader liquidity crunch, July saw reduced deposit activity and continued redemptions to the Renzo protocol compared to previous months, leading to a total net outflow of approximately 9.1k ETH for the month.
The withdrawal buffer decreased from 16.5k to 14.3 stETH and from 7.8k to 4,7k ETH over the month. Despite this reduction, the buffer maintains a healthy available size above 12k ETH-equivalent, even after accounting for the waiting queue, which remains in line with our recommendations.
DEX liquidity across chains exhibited mixed trends over the past 30 days. Ethereum led with the strongest growth, showing significant increases in both ezETH liquidity and exit liquidity. Meanwhile, Unichain experienced a substantial 65.26% rise in ezETH, though its exit liquidity declined by 21.86%.
ETH-based exit liquidity declined by approximately 25.49% in July before recovering to just below 20k ETH equivalent. This decline was primarily driven by high ETH demand during the liquidity crunch. Exit liquidity on Fluid was temporarily drained, though it has since recovered to 2k ETH. Despite these drawdowns, the Unichain pool remains well-balanced with 5.2K ETH and 5.4K ezETH, demonstrating stable liquidity conditions even after the reduction in exit assets.
Composabilty
During the liquidity crunch, ezETH loopers on lending protocols remained largely stable, as the stETH borrow rate stayed consistent throughout the period. Consequently, no major deleveraging occurred on Aave, and protocol balances held steady, demonstrating continued confidence in ezETH-collateralized strategies despite broader market stress.
ezETH collateral usage on Aave’s Prime instance remained stable throughout the crisis, showing minimal impact and little deviation during the period. In contrast, stETH collateral faced notable volatility, with drawdowns reaching up to 15%. Since the Prime market is primarily used for borrowing wstETH rather than direct ETH, ezETH retained its role as reliable collateral and even saw increased supply in July, reaching approximately $700M.
Lending and borrowing activity on the Prime market continued without disruption. Borrow amounts consistently increased throughout July reaching around $600M.
The top supplier on Aave’s Prime market remains unchanged. Liquidity provision and associated risk exposure therefore continue to be heavily concentrated in a single major participant.
Summary
July was marked by a temporary but sharp liquidity disruption that cascaded across the staking and restaking ecosystem. Despite this volatility, Renzo’s ezETH maintained a stable yield. While the protocol saw increased outflows and ezETH experienced depeg pressure, liquidity buffers remained stable and exit liquidity recovered steadily by month-end, keeping the protocol functional and safe. Furthermore, lending activity on Aave remained resilient, with no major deleveraging and strong ezETH collateral usage.