What’s Up With Synthetix Stablecoin (sUSD) as USD Peg Drops to $0.83?

Updated on Apr 10, 2025 at 1:14 pm UTC by · 2 mins read

Synthetix’s stablecoin, sUSD, has plunged to a five-year low of $0.83, raising investor concerns about its stability.

Synthetix USD (sUSD), the native stablecoin of the Synthetix protocol has lost its USD-peg, dropping to a five-year low of $0.83 and leaving investors worried about what’s happening next. Since the beginning of 2025, the asset has seen huge instability and some market analysts believe that this could see a collapse like Terra UST.

On January 1, sUSD experienced a dip to $0.96, recovering only slightly to $0.99 by early February. Throughout February, prices remained volatile before achieving stability in March. However, on April 10, sUSD plunged to a five-year low of $0.83, marking a significant decline.

As we know, sUSD is a crypto-collateralized stablecoin wherein users lock Synthetix (SNX) tokens to mint sUSD, while making its stability highly dependent on the SNX market value.

Risks of Synthetix Stablecoin (sUSD) Death Spiral Increases

On April 1, when the sUSD token dropped to $0.91, Rob Schmitt, co-founder of the risk tokenization platform Cork Protocol, outlined the potential risks of a “death spiral scenario” for the stablecoin.

Schmitt also pointed out that sUSD’s design shares notable similarities with Terra’s TerraUSD (UST), which faced a brutal collapse back in 2022. Although he acknowledged key differences in collateralization and debt management, Schmitt cautioned that the fundamental risks underlying such a model remain.

However, despite his concern, Schmitt stated that a Terra-like collapse is a bit unlikely due to the massive $30 million treasury of Synthetix, which holds nearly half of the outstanding sUSD debt. In the case of an unwinding scenario, these reserves can come into the picture. Note that this isn’t the first time sUSD has depegged, as it fell to $0.92 in 2024.

Synthetix founder Kain Warwick previously addressed the dips, attributing them to the removal of the primary driver behind sUSD buying. “New mechanisms are being introduced but in this transition there will be some volatility,” Warwick wrote.

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