TLDR
- Synthetix’s sUSD stablecoin has fallen to as low as $0.68, around 30% below its intended $1 peg
- The depeg followed implementation of SIP-420, which changed debt risk structures and lowered collateralization ratios
- Market cap of sUSD dropped from $30 million to $24.5 million during April 2025
- Synthetix has short, medium, and long-term plans to address the depeg issue
- The oversupply of sUSD in Curve pools (over 90% of total supply) is contributing to price decline
The crypto-collateralized stablecoin from Synthetix, sUSD, has fallen further from its target US dollar peg, reaching new all-time lows under $0.70. At press time, sUSD is trading at approximately $0.70, representing a 30% deviation from its intended 1:1 peg with the US dollar.
The depegging began earlier this year. On January 1, 2025, sUSD dropped to $0.96 and only temporarily recovered to $0.99 in early February. The price has been unstable throughout the first quarter of 2025.
The recent troubles intensified following the implementation of Synthetix Improvement Proposal 420 (SIP-420). This change was intended to improve capital efficiency but appears to have destabilized the asset.
SUSD Price
Protocol Changes Behind the Depeg
SIP-420 introduced key changes to the Synthetix ecosystem. The proposal shifts debt risk from individual stakers to the protocol itself. It also lowered the collateralization ratio from 500% to 200%.
The proposal introduced a new staking pool called the “420 Pool,” where users can delegate their stakes and earn rewards. These modifications were designed to enhance capital efficiency within the system.
However, these changes appear to have backfired. The reduced collateralization requirements led to an oversupply of sUSD that has outpaced market demand.
Curve pools have been particularly affected, with sUSD now making up over 90% of the total supply in these pools. This imbalance has further contributed to the price decline of the stablecoin.
Market Impact and Investor Response
The market capitalization of sUSD has fallen from $30 million at the start of April to $24.5 million at press time. This decline has prompted many investors to adjust their positions in response to the ongoing depeg.
Interestingly, the native token of Synthetix, SNX, has remained relatively stable during this period. SNX has dipped just 1.08% over the past week, trading at $0.63. However, from a broader perspective, SNX has fallen approximately 26% over the past 30 days amid the overall crypto market downturn.
The depegging situation has raised questions about the stability of synthetic assets in general. Investors appear increasingly cautious about the future prospects of sUSD until the oversupply issues are addressed.
⚓️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
Synthetix’s Response and Recovery Plans
A spokesperson from Synthetix told reporters that this isn’t the first time the asset has been under stress. “Synthetix and sUSD have weathered multiple bear markets and periods of stablecoin volatility; this is not the first resilience test,” they stated.
The company has outlined a three-tiered approach to address the current situation. In the immediate term, Synthetix will continue supporting liquidity for sUSD through Curve pools and deposit campaigns on its derivatives platform, Infinex.
For medium-term solutions, the protocol has introduced “simple debt-free” SNX staking. This feature aims to encourage individual debt repayment within the ecosystem.
It is worth pointing out that sUSD is not an algo stable, it is a pure crypto collateralised 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. These mechanism are being transitioned right now, hence the drift.
— kain.depeg (@kaiynne) April 2, 2025
Looking to the long term, Synthetix plans to implement capital efficiency changes through the 420 Pool. The protocol will also take over management of sUSD supply at the protocol level and introduce new “adoption-focused mechanisms” across its product range.
Synthetix founder Kain Warwick addressed the situation on April 2. He explained that the volatility is largely due to the primary driver of sUSD buying having been removed. “New mechanisms are being introduced, but in this transition, there will be some volatility,” Warwick said on social media.
Warwick emphasized that sUSD is not an algorithmic stablecoin but rather a “pure crypto collateralized stable.” He noted that the peg “can and does drift, but there are mechanisms to push it back in line if it goes above or below the peg.”
While the Synthetix team describes the current situation as a “transition phase,” the continuing depeg has raised concerns about the long-term viability of the stablecoin model. The future stability of sUSD will depend on how effectively the team can address the oversupply issues and rebuild market confidence.
