Synthetix sUSD Stablecoin Falls to $0.70, Protocol Changes Cited as Cause

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Synthetix sUSD Stablecoin Falls to $0.70, Protocol Changes Cited as Cause

• sUSD has fallen significantly below its $1 peg, trading as low as $0.66 before recovering to around $0.70-$0.80
• The depegging began after the implementation of SIP-420, which reduced collateralization ratio from 500% to 200%
• Synthetix team says they have short, medium, and long-term plans to address the stability issues
• Market cap of sUSD has declined from $30 million to approximately $24.5 million
• Despite sUSDs troubles, the SNX token has shown resilience, even gaining 7.5% in a 24-hour period

Synthetixs native stablecoin, sUSD, continues to drift further from its intended $1 peg, reaching all-time lows below $0.70. The crypto-collateralized stablecoin, which is backed by SNX tokens, has been experiencing instability since the beginning of 2025, with recent price action showing a concerning downward trend.

According to CoinMarketCap data, sUSD is currently trading around $0.70, representing a 30% deviation from its target peg with the US dollar. The stablecoin reportedly reached as low as $0.66 before showing a slight recovery. This decline marks a stark contrast to what users expect from a stablecoin, which is designed to maintain a stable value relative to its peg.

The depegging crisis began in mid-March 2025 and has progressively worsened over the past month. By April 9, the stablecoin had fallen to approximately $0.84, and it has continued its downward trajectory since then. The market capitalization of sUSD has also decreased from $30 million at the start of April to around $24.5 million at press time.

sUSD Price on CoinGeckoThe Root of the Problem

The primary cause of sUSD‘s instability appears to be linked to recent protocol changes, particularly the implementation of Synthetix Improvement Proposal 420 (SIP-420). This proposal was designed to enhance capital efficiency but has led to unintended consequences for the stablecoin’s stability.

SIP-420 introduced a new staking pool called the “420 Pool” and reduced the collateralization ratio from 500% to 200%. While this change was intended to improve efficiency, it has resulted in an oversupply of sUSD that has outpaced market demand.

The proposal also shifts debt risk from stakers to the protocol itself, creating what Synthetix describes as “structural shifts” in the ecosystem. These changes have removed the primary driver of sUSD buying, contributing to the current volatility.

Kain Warwick, founder of Synthetix, addressed the situation on April 2, explaining that the volatility is largely due to transitions in the protocols mechanisms. “New mechanisms are being introduced, but in this transition, there will be some volatility,” Warwick stated in a post on X.

Curve Pools and Collateral Changes

The situation has been particularly evident in Curve pools, where sUSD now reportedly accounts for over 90% of the total supply. This imbalance has further contributed to the depreciation of the stablecoin as it struggles to maintain demand relative to other cryptocurrencies.

Warwick has also disclosed that Synthetix had divested 90% of its ETH position while increasing its SNX holdings. This adjustment in the protocol‘s collateral composition may be having unexpected effects on investor perception of sUSD’s stability.

It‘s worth noting that despite sUSD’s troubles, the SNX token has shown resilience. While SNX has fallen approximately 26% over the past 30 days amid the broader crypto market downturn, it has remained relatively stable in recent weeks, even gaining 7.5% in a 24-hour period according to one report.

⚓️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…

— Followin (@followin_io) April 17, 2025

Synthetixs Response and Future Plans

The Synthetix team has acknowledged the challenges facing sUSD but emphasizes that this isnt the first time the asset has experienced stress. “Synthetix and sUSD have weathered multiple bear markets and periods of stablecoin volatility; this is not the first resilience test,” a spokesperson from Synthetix told Cointelegraph.

The team has outlined a three-tiered approach to address the current situation. In the short term, they will continue supporting liquidity for sUSD through Curve pools and deposit campaigns on their derivatives platform, Infinex.

For the medium term, Synthetix has introduced “simple debt-free” SNX staking that they say will “encourage individual debt repayment.” This measure aims to address some of the structural imbalances created by the protocol changes.

Long-term plans include 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.

Warwick has emphasized that “sUSD is not an algo stable, 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.”

The future of sUSD and the broader Synthetix ecosystem will depend on how effectively these measures can restore stability to the stablecoin. For now, users and investors are advised to monitor the situation closely as the protocol navigates this challenging transition period.