The Synthetix protocol, whose issuance is algorithmic, has an asset—sUSD—that has seen its peg continue to deteriorate. The current assets that are over-collateralized do not seem to be affecting the intended value that sUSD should hold.
The asset dipped as low as $0.869 and now hovers at about $0.908. The mechanism that maintains the value seems to be undergoing a transformation that has some asking if the underlying setup can maintain the sort of peg seen in typical stablecoins.
sUSD continues to depeg, with its price dropping as low as $0.869 and currently trading at $0.908. Previously, Synthetix founder Kain stated that the sUSD peg restoration mechanism is undergoing a transition. He also revealed that he has sold 90% of his ETH holdings and increased…
— Wu Blockchain (@WuBlockchain) April 10, 2025
The dip marks one of the most significant instances of sUSD losing its peg in recent memory and comes at a sensitive moment for Synthetix. The community and team behind the protocol have acknowledged that the stablecoin is in a “transitional period” as it shifts away from the debt-burning model that previously helped keep the peg stable.
Attracting attention currently is the Synthetix ecosystem, where instability exists. And major players in Synthetix, including its founder, Kain Warwick, are very much involved and making headlines.
Warwick recently revealed to the Synthetix community via a video that he has sold 90% of his ETH to buy Synthetix and double his exposure to the protocol’s native token, SNX.
A Transition in Motion: From Debt-Burning to the 420 Pool
In recent weeks, the Synthetix community has been open about the developing mechanics under sUSD’s peg. Per a detailed post in the official sUSD Discord, the old model— which required burning debt to maintain the peg— is being retired. In its place, the 420 pool and an upcoming mechanism for liquidity pool management are expected to step in as the primary means of restoring and maintaining sUSD peg stability over the long term.
The change has briefly disconnected sUSD from its dollar equivalence.
❤️💛💚💙
🚨 sUSD has De-pegged 🚨
Synthetic USD (#sUSD) is going through a Transition Period, possibly involving hormones.
Will the PulseChain Pioneers build a nice Decentralised Stablecoin called #pDAI?
From the Synthetix sUSD Discord:
“We’re in a transitionary period… pic.twitter.com/FXGTwmrNKw
— yourfriendSOMMI ❤️💛💚💙 (@yourfriendSOMMI) April 10, 2025
“We’re in a transitionary period where maintaining the peg no longer burns debt effectively,” the post states. “The 420 pool will eventually lead to sUSD being designed in a way so that it is more efficient in the long term and much more effective at maintaining the peg with the dollar.”
The current main problem is surplus supply. With the previous stabilization mechanisms now defunct and the new system still being rolled out, the market is flooded with sUSD. This excess is creating downward price pressure and making it difficult for sUSD to achieve the necessary demand to maintain its dollar peg.
Even though the protocol states that sUSD is still healthily over-collateralized, many in the crypto community now question whether any stablecoin can be trusted if the collateral it is backed by has been deemed by the market as having lost its value. sUSD was down 1.3% to $0.9860 at the time of writing.
Short-Term Incentives, Long-Term Vision
In reaction to the depegging, Synthetix is implementing initiatives to reinforce confidence and liquidity in the short term. These consist of: upping the ante for Curve liquidity pools — in which sUSD is paired with other stablecoins — and extending the Infinex deposit campaign. The campaign invites users to stake sUSD in exchange for rewards, effectively and temporarily helping to remove the excess supply from the market.
The team is also working on something else that could change the demand dynamics for sUSD, and that’s something we call “snaxchain,” which is an initiative of ours that we hope will allow for a lot more utility in the sUSD space. What is snaxchain? It’s not so much a project as it is a rethinking of sUSD and the spaces in which it can be used and work. We have a lot of fun ideas, and some of them are quite wild.
Discord message emphasized the criticality of the sUSD peg for the success of the 420 pool—”The sUSD peg is critical to the success of the 420 pool,” the Discord message stated. On the same day, another Discord message made clear the Plan B being acted upon. We will maintain incentives for a stable sUSD price during this transition towards longer-term solutions.
Expected in the coming weeks are additional announcements that will outline further measures intended to stabilize sUSD. The market, until then, will remain in this holding pattern, with sUSD trading at a decent, if not too concerning, discount in comparison with the US dollar and SNX volatility reflecting the sort of concern mixed with hope that it has recently reflected.
Though the current depeg is noteworthy, it is not the first instance of an algorithmic stablecoin having structural issues. What makes Synthetix distinct is its clear and forthright operation, along with its exhibited flexibility—both of which might help restore not just confidence in sUSD, but also in stablecoins as a whole.
Even so, the clock is ticking. Stablecoins depend on stability — and getting back to the peg is now more than just a technical must. It’s a test of whether the trust that users place in stablecoins can be regained.
Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services.
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