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Synthetix USD (sUSD), the crypto-collateralized stablecoin of the Synthetix protocol, plunged to $0.83 on April 10—its lowest value in five years—raising fresh concerns about the token’s ability to maintain its dollar peg.
The drop caps off a turbulent start to 2025 for the stablecoin. sUSD slipped to $0.96 on January 1 and has struggled to recover. Although it momentarily rebounded to $0.99 in early February, the peg has remained unstable, with April’s dive marking a sharp escalation in investor anxiety.
As a stablecoin backed by SNX, the Synthetix network’s native token, sUSD’s peg stability is directly tied to SNX’s market performance. This model introduces vulnerabilities similar to TerraUSD (UST), the now-defunct algorithmic stablecoin that collapsed in 2022.
Rob Schmitt, co-founder of Cork Protocol, highlighted the risk of a “death spiral” if sUSD redemptions exert too much sell pressure on SNX. “If the value of SNX drops sufficiently, sUSD is no longer fully backed,” Schmitt explained, warning of a cascading deleveraging event.
sUSD, the algorithmic stablecoin underpinning the @synthetix_io markets, backed by SNX, is experiencing a significant and sustained depeg. Why did it depeg and is this the start of a death spiral or will it repeg? Let’s dive in!
— Robdog 🍾 (@robdogeth) April 1, 2025
What is sUSD?
To understand sUSD, we must first… pic.twitter.com/Gq4Q7SX904
However, Schmitt tempered fears, noting Synthetix’s $30 million treasury—holding roughly half of the outstanding sUSD debt—could act as a buffer. “This sUSD can be unwound to avoid a death spiral,” he added.
Synthetix founder Kain Warwick also weighed in, downplaying fears of collapse. “We’re transitioning mechanisms, so there will be volatility,” he wrote. Warwick emphasized that while the peg may drift, built-in mechanisms will restore alignment over time.
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
The recent sUSD instability mirrors broader trends. On April 7, another stablecoin, syUSD, fell to $0.94 amid concentrated selling. The project blamed the deviation on market conditions and promised improvements to its redemption system.
As crypto markets remain volatile, the spotlight is once again on the fragility of decentralized stablecoins. Whether sUSD can recover its peg and regain investor trust may depend not just on treasury reserves but on how swiftly and effectively Synthetix deploys new stabilization tools.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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I’m a crypto enthusiast with a background in finance. I’m fascinated by the potential of crypto to disrupt traditional financial systems. I’m always on the lookout for new and innovative projects in the space. I believe that crypto has the potential to create a more equitable and inclusive financial system.
