The SNX deposit halt was enforced by major South Korean exchanges, citing increased USD risk and prompting fears of stablecoin volatility.
Regulatory Warning Sparks Action from Leading Exchanges
Upbit and Bithumb, South Korea’s largest cryptocurrency exchanges, have stopped deposits of Synthetix (SNX) tokens. 2. SNX declined by 23% in one day.
The Digital Asset Exchange Alliance (DAXA) issued this warning, highlighting the increasing volatility and risks surrounding the asset and the associated stablecoin, sUSD.
The digital currency, sUSD, that SNX supports has dropped considerably farther than the expected value of $1. Last month, Synthetix’s stablecoin sUSD fell to about $0.68, or its lowest level in five years, while SNX itself is down 26% over the past month.
Upbit and Bithumb Take Precautionary Measures
Upbit suspended SNX deposits and labeled the token to slow down the asset’s trading. The exchange mentioned that there are not too many strong use cases for SNX, and it poses a risk as collateral for the unstable USD. Upbit said it will do a detailed review before deciding on whether to resume support or officially delist the asset.
Bithumb, too, halted SNX deposits and cautioned customers about the currency. Yet, the exchange said this decision could be cancelled if the problems are resolved.
As of October 14, major South Korean exchange Korbit issued an alert to traders over the risks associated with SNX and sUSD. Coinone noted that it is monitoring developments closely, while other exchanges have yet to release statements. However, expert sentiment on SNX and USD remains firmly negative. No major developments have affected the two tokens, leaving their risks largely unchanged.
Synthetix Founder Urges Community Action
To help with the crisis, Synthetix founder Kain Warwick has asked stakers to join a new mechanism that will help restore stability to sUSD. He cautioned that if adequate participation isn’t reached, the token may need to be cross-archived for stabilization.
The USD managed to push back up to $0.87 but still remains well below its peg following this. Synthetix has pledged short- and long-term solutions that will bring back confidence and stability to the ecosystem.
Market Reaction and Broader Implications
The steps taken by South Korea’s leading exchanges show how much stablecoin stability and investor protection have come to matter in crypto. The failure of sUSD to keep its value has led many to believe that it will fail and will pose bigger risks.
As the situation continues to evolve, exchanges and traders are cautious for now. The Synthetix protocol’s attempts to recover sUSD will ultimately decide if SNX has the potential to recover, or will it face further delistings from major platforms?
Conclusion
Upbit and Bithumb’s suspension of SNX deposits demonstrates how cryptocurrencies maintain a delicate balance between innovation and regulation. As DeFi projects like Synthetix face hurdles concerning the stability of their stablecoins, it is paramount for the exchange and the regulator to protect investors.
Despite sUSD’s slight recovery, the instability that continued for so long is a lesson not to be forgotten. To ensure that SNX and similar projects maintain long-term sustainability, the restoration of confidence and addressing vulnerabilities would be critical.
