Ethereum’s “Magic Money” and Its Impact on Bitcoin and Crypto

Magic Money and Ethereum’s Bubble

A crypto analyst warns that Ethereum’s liquid-staked tokens (LSTs) and liquid-restaked tokens (LRTs) are creating “magic money” that could lead to a market crash. These tokens are backed by nothing substantial, similar to fractional reserve banking. The analyst believes the crypto market is not equipped to handle this artificial inflation.

Stablecoins and the Bubble

Stablecoins backed by LRT tokens are also a concern. If ETH’s value drops, these stablecoins could lose their peg and become worthless, triggering a “liquidation cascade.”

Risks of Native Yield Platforms

Platforms like Blast, which use LSTs and stablecoins to provide yield, pose significant risks. If the platform becomes insolvent, users could lose their funds.

Impact on Bitcoin and Crypto Users

If the LST/LRT bubble bursts, it could cause a crash in the Ethereum ecosystem and beyond. Bitcoin could become the “liquidity of last resort” as investors try to exit their positions.


The analyst urges crypto users to be aware of the risks associated with Ethereum’s “magic money” and its potential impact on the broader crypto market.