Renzo's liquid restaking token (LRT), ezETH, underwent a significant depegging event resulting in the liquidation of millions from users utilizing the token as collateral on leverage protocols like Gearbox.

According to CoinMarketCap data, the digital asset's value plummeted to a low of $2,755 before rebounding to its current level of $3,178 at the time of writing.

Notably, decentralized exchange Uniswap experienced an even more severe depegging of ezETH, with its value dropping as low as $700, attributed to liquidity challenges.

Renzo is a prominent liquid restaking protocol, with over $3 billion worth of assets locked on its platform, as per DeFillama data.

Liquidation events occurred, with the DeFi protocol Gearbox confirming that the depeg resulted in the liquidation of several Credit Accounts. Gearbox's founder, 0xmikko, provided further details, stating that 115 Credit Accounts were liquidated, with 10,650 ezETH sold on the Balancer pool. The liquidation losses of 25.77 ETH were automatically covered by Gearbox's internal reserve fund.

Simultaneously, Cork Protocol explained that the liquidations caused a significant sell-off of ezETH previously held as collateral, flooding the market and driving the price of ezETH down to 0.2.

These liquidations coincided with the release of Renzo's native REZ token, leading to the emergence of Renzo-related phishing scams on social platform X (formerly Twitter).

Web3 security firm Scam Sniffer identified instances where Renzo users collectively lost over $500,000 to a malicious permit signature scam.

Amidst this market turbulence, trader czsamsunsb.eth seized the opportunity, investing 4,099 ETH to acquire 4,221 ezETH, resulting in a profit of 121.65 ETH, according to Lookonchain's findings.

This depegging event signifies a significant risk across all LRTs, as explained by crypto analyst Tommy. DeFi researcher Ignas warned of potential exacerbation in LRT depegging, particularly if Eigenlayer introduces key upgrades of slashing and permissionless AVS.

Ignas highlighted the risk of slashing causing disruptions to LRT pegs due to liquidity concerns and panic-driven withdrawals. While slashing may stabilize prices eventually, the interim period could witness harsh liquidations, especially for LRTs with low liquidity and widely accepted as collateral.