Spark: The delisting of rsETH assets in January once caused strong dissatisfaction among ETH looping leverage users, but it has now been proven that the strategy was prudent.

Spark Protocol’s Head of Strategy, monetsupply.eth, stated on X that in January of this year, assets with low usage such as rsETH were delisted and the range of collateral and functionalities continued to be tightened, which at the time triggered strong dissatisfaction among “ETH circular leverage” users.

Additionally, Spark has long set a relatively high maximum interest rate cap in the ETH lending market, and over the past year has ceded some business and revenue to a certain exchange (whose ETH borrowing rate once dropped to 10% or lower). However, under the current market crisis conditions, this strategy has proven to be more prudent. SparkLend still maintains ample ETH withdrawal liquidity, while that exchange has experienced liquidity shortages, and even “lock-in” situations, on Ethereum mainnet as well as multi-chain markets such as Arbitrum and Base.

monetsupply.eth further warned that since ETH is the core collateral asset, when market utilization reaches 100%, collateral liquidations cannot be properly executed. Liquidity depletion not only affects depositors’ experience, but could also pose systemic risk. Given the current liquidity shortage at that exchange, if the price of ETH falls by 15%-20%, significant bad debt could accumulate (in addition to the potential impact of the rsETH incident).