The synthetic USD (sUSD) stablecoin, issued by Synthetix, has plunged below its $1.00 peg, sinking as low as $0.83 before rebounding slightly.

This drop marks the stablecoin’s second depeg in less than a year, reigniting concerns about the issuer’s stability mechanisms.

Oversupply Triggers Peg Instability

sUSD’s latest tumble has been attributed to excess supply flooding the market, with reports quoting Synthetix core contributor Fenway saying that traders are offloading the asset in large volumes. The disparity is most apparent on Curve, with sUSD comprising 75% of the DAI-USDC-USDT-sUSD pool, indicating that traders are actively divesting from the asset.

Adding to the pressure, the peg restoration mechanism is in transition. In a series of posts on X earlier in the month, Synthetix founder Kain Warwick mentioned that the team was rolling out new mechanisms to stabilize the peg, warning that volatility should be expected during the transition phase.

“The primary driver of sUSD buying (debt management) has been removed,” he tweeted. “New mechanisms are being introduced, but in this transition, there will be some volatility.”

At the time of writing, the stablecoin was priced at $0.8593, 7.2% below its level from 24 hours ago and 10% over seven days. It also fell 13.3% against Ethereum (ETH) and 10.9% versus Bitcoin (BTC), highlighting its poor relative performance.

The Optimism version of the asset wasn’t spared either, dipping 9.4% over the last day to register a new all-time low of $0.8224.

It isn’t the first time sUSD has stumbled. In May 2024, the stablecoin experienced a similar drop after a major liquidity provider dumped large amounts into Curve.

Warwick’s Big SNX Bet and Market Fallout

While Warwick insists the peg is not at risk of a death spiral, the optics are worrisome. sUSD isn’t just another stablecoin; it’s one of the longest-running after Tether (USDT) and TrueUSD (TUSD), having survived since June 2018. However, despite the resilience, the crypto asset is a pale shadow of its former self, dramatically shrinking from its peak capitalization of $500 million to just about $26 million today.

Recently, the Infinex founder revealed that he’s been quietly amassing Synthetix’s native SNX token and now holds 35 million. This is more than double his initial position in 2018. He explained that he funded the purchases by selling as much as 90% of his ETH holdings since 2020 to support Synthetix operations.

Currently, SNX is trading at $0.62, a 3.4% improvement since yesterday. Still, the token is in the red across all other timeframes, dipping nearly 7% in the last week and 32% over the past month. Additionally, it is down 84% across 12 months and has dropped 97% from its all-time high. Despite the bleak numbers and the sUSD depeg, Warwick is confident, claiming he’s “not worried” about Synthetix.

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