sUSD Depegs to $0.85, Trading Volume Skyrockets
Synthetix’s algorithmic stablecoin sUSD has continued to depeg from its $1 peg, reaching $0.8597 on April 10. This represents a 6% decline in 24 hours. Meanwhile, 24-hour trading volume spiked by close to 487% to more than $2.1 million, says CoinGecko. The increase in trading shows heightened speculation and growing unease in the DeFi space.
SIP-420 Triggers Collateral Shift
The latest price drop coincides with the implementation of Synthetix Improvement Proposal 420 (SIP-420), which introduced the “420 Pool,” a new way for SNX holders to create sUSD based on a reduced collateralization rate of 200% instead of 500%. Although meant to boost liquidity, the change appears to have precipitated an unexpected flood of sUSD into circulation—placing downward pressure on its price.
Analyst Warnings and Protocol Response
DeFi commentator Panterafi pointed out on X that the flooding of new sUSD being minted and yield farming tactics of selling it is destabilizing the peg. Although sUSD remains overcollateralized, its price is increasingly market-driven, as opposed to the likes of arbitrage or repayment schemes.
Synthetix developers acknowledged the issue on Discord as a “transitionary period.” They issued statements to release additional sUSD use cases through future ventures like Snaxchain and to increase rewards for liquidity pools to enable soaking up excess supply.
Community Divided, Founder Remains Optimistic
This is not the first time sUSD has fallen below its peg. It happened previously in March and May 2024. While some community members are still optimistic, others like DeFi analyst Eldar are concerned that the model can handle less intangible intrinsic value support for SNX.
Nevertheless, founder Kain Warwick was confident in the strength of the system, having just increased his holdings of SNX. He reiterated that this current depeg is merely a temporary effect of the implementation of SIP-420.
The coming weeks will be break-or-make time for sUSD stability, when market dynamics and developer behavior come together to define the future of the token.
