The native stablecoin of the Synthetix protocol, Synthetix USD (sUSD), is once again facing challenges as it hits an all-time low below $0.70, raising concerns about its stability against the US dollar.
Market Overview of Synthetix USD
As of now, sUSD is trading at $0.70, which is 30% below its intended 1:1 peg with the US dollar. sUSD is a crypto-collateralized stablecoin where users lock SNX tokens to mint sUSD. Its stability is highly dependent on the market value of Synthetix (SNX).
Company's Stabilization Strategies
A spokesperson from Synthetix stated that the current volatility of sUSD is driven by 'structural shifts' following the launch of SIP-420. The company is developing short-, medium-, and long-term plans to mitigate risks. In the short term, Synthetix will support liquidity for sUSD through Curve pools and deposit campaigns on its derivatives platform, Infinex. Medium-term measures include the introduction of 'simple debt-free' SNX staking to encourage individual debt repayment.
Founder’s Perspective
Synthetix founder Kain Warwick commented on the situation, noting that the current volatility is largely due to the removal of the primary drivers for sUSD buying. 'New mechanisms are being introduced, but in this transition, there will be some volatility,' he said. Warwick also clarified 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.'
Thus, despite the current drop in the Synthetix USD price, the company is prepared to employ various strategies for its stabilization and to improve the stablecoin's position in the market.
