TLDR
- Synthetix’s sUSD stablecoin has fallen significantly from its 1:1 USD peg, trading as low as $0.68
- The depegging began in early 2025 and has worsened through April, with a 30% drop from intended value
- Synthetix founder Kain Warwick attributes volatility to transition period after implementing SIP-420 proposal
- The team has outlined short, medium, and long-term plans to address the instability
- Despite sUSD’s troubles, the native SNX token has shown relative stability and even some gains recently
Synthetix’s USD stablecoin (sUSD) has fallen dramatically from its intended 1:1 peg with the US dollar, reaching an all-time low of $0.68 before recovering slightly to $0.70. The crypto-collateralized stablecoin, which relies on SNX tokens as collateral, has been facing mounting pressure since early 2025.
The depegging crisis began on January 1, when sUSD dropped to $0.96, briefly recovered to $0.99 in February, but then continued a downward trend. By mid-March, sUSD began to drift more severely from its peg, and by April 9, it had fallen to approximately $0.84, representing a 16% decline.
This instability has raised concerns among traders and investors who rely on stablecoins to maintain their dollar value. As of publication, sUSD is trading at approximately 30% below its intended peg, with a market cap of around $25.46 million.
⚓️The depegging of the stablecoin $sUSD has intensified, currently trading at $0.8030, Why?
According to market data, the depegging of $sUSD has worsened, with its current price at $0.803 — a 24-hour drop of 5.0%, bringing its market capitalization down to $25.46 million.$sUSD… pic.twitter.com/h3wC27MWcy
— Followin (@followin_io) April 17, 2025
Understanding the Causes
Synthetix founder Kain Warwick identified several factors behind the depegging. He explained that the volatility stems from “structural shifts” following the implementation of SIP-420, a proposal that transfers debt risk from stakers to the protocol itself.
“The primary driver of sUSD buying has been removed. New mechanisms are being introduced, but in this transition, there will be some volatility,” Warwick stated in a social media post.
He also emphasized that “sUSD is not an algorithmic stablecoin, it is a pure crypto-collateralized stable. The peg can and does drift, but there are mechanisms to push it back in line if it goes above or below the peg.”
Another contributing factor appears to be changes in the collateral backing sUSD. Warwick disclosed that Synthetix had divested 90% of its ETH position and increased its SNX holdings. This adjustment in the protocol’s collateral composition may be affecting investor confidence in sUSD’s stability.
Market Response and SNX Performance
In contrast to sUSD’s troubles, the SNX token has shown greater resilience. While SNX has fallen approximately 26% over the past 30 days amid the broader crypto market downturn, it has held relatively steady in recent weeks, dipping just 1.08% over the past week and trading at $0.63.
More recently, SNX has seen positive movement, with reports indicating a 7.5% gain in a 24-hour period despite sUSD’s continued struggles. This divergence suggests that the market may view the protocol’s long-term prospects favorably despite the current stablecoin instability.
The uptick in SNX’s value could be related to the protocol’s collateral strategy changes, with increased SNX holdings potentially being perceived as a positive development for the token.
Recovery Strategy
A spokesperson from Synthetix told reporters that the protocol has weathered similar challenges before: “Synthetix and sUSD have weathered multiple bear markets and periods of stablecoin volatility; this is not the first resilience test.”
The team outlined a three-phase plan to address the depegging issue:
In the short term, Synthetix will continue supporting liquidity for sUSD through Curve pools and deposit campaigns on its derivatives platform, Infinex.
For mid-term measures, the protocol has introduced “simple debt-free” SNX staking that it says will “encourage individual debt repayment.”
The long-term strategy involves making capital efficiency changes through the 420 Pool, taking over protocol-level management of sUSD supply, and introducing new “adoption-focused mechanisms” across Synthetix products.
As the situation continues to evolve, the Synthetix team faces pressure to resolve the underlying issues causing the instability. The future of sUSD and the broader Synthetix ecosystem will depend on the protocol’s ability to restore market confidence and re-establish the stablecoin’s peg to the US dollar.
The current sUSD volatility presents risks for users and investors in the Synthetix ecosystem, and the market will be closely watching the effectiveness of the team’s recovery measures in the coming weeks.
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