According to a message from Synthetix’s team, the sUSD peg was destroyed because its supply was oversupplying the marketplace. This sharp decline shows how unstable the project’s peg system is getting. The asset has been plagued by this issue since the beginning of 2025.
The drop began in January, with the USD going down to $0.96 and then being unable to get back on its feet in February. It did stabilize in March for a bit, but it carried on sliding well into April. This resulted in a recent crash.
sUSD works by allowing users to lock Synthetix Network Tokens (SNX) as collateral for the sUSD, which makes it close to the value of SNX. When the price of SNX falls, the system experiences increased stress because there is less collateral backing the stablecoin.
The drop we are seeing right now is because there is a lot of sUSD floating around and not enough people buying. On liquidity venues like Curve, traders have been selling off sUSD in giant volumes and causing major imbalances in liquidity pools, demonstrating the lack of confidence in the market.
Synthetix is also working on new peg restoration methods. Synthetix founder Kain Warwick said the transition is causing volatility, but it is expected to lead to a better and more stable peg in the future. Observers have noted the removal of the main buying incentive for sUSD. Nevertheless, Warwick is developing new solutions to restore sUSD to $1.
Falling prices of SNX cause concerns of a “death spiral,” which causes more sUSD redemptions and further falling prices, automating a collapse. Still, experts who know how Synthetix works think such an outcome will probably not happen. The project possesses $30 million in its treasury, a substantial amount of sUSD that can effectively counteract runaway redemptions.
Even with this assurance, sUSD’s problems fit into a bigger picture. In mid-2024, a similar depegging incident happened due to a large-scale sell-off of sUSD by a major liquidity provider. The market cap of the token has dropped from $500 million to only $26 million today.
Nonetheless, Warwick continues to back the initiative. He disclosed that he has raised his stake in SNX by a significant amount and is now holding 35 million tokens. This quantity is more than double his 2018 holding. He also sold most of his ETH over the years to support Synthetix.
SNX is down 84% over the past year and 97% from its all-time high—thus, it has faced challenges. Despite a slight 3% gain recently, the token appears to be under pressure.
Despite the challenges, Synthetix maintains confidence in its project. They consider the present volatility to be a transitory phenomenon and believe that the evolving peg mechanisms will help in establishing trust in sUSD in the long run.
