sUSD Synthetic Asset Depegs from $1 to $0.77, Raising Eyebrows Among Investors

The sUSD, an EOS-based synthetic asset, has tumbled to $0.77, raising eyebrows among investors. This depeg occurs after new changes were made to the Synthetix protocol, aiming to enhance capital efficiency.

An EOS-based synthetic asset, sUSD has dropped to $0.77, raising eyebrows among investors. This depeg comes after new changes were made to the Synthetix protocol in a bid to enhance capital efficiency.

Recent declines in the price of sUSD has also brought into question the credibility of decentralised financial systems.

At the start of April, sUSD had a market capitalization of $30 million. As of press time, it had reduced to $24.5 million. This depeg has brought about a great deal of concern in the market, with several investors adjusting their positions due to the depeg.

sUSD is an anchored stablecoin that is collateralized by a synthetic asset, specifically the SNX token, which powers the Synthetix protocol. It is designed to track the value of the U.S dollar within the cryptocurrency ecosystem via Chainlink oracles.

However, the stability of the stablecoin has been affected by recent changes to the protocol. The issues began in March and escalated after the adoption of Synthetix Improvement Proposal 420 (SIP-420). This proposal was meant to improve capital efficiency but has had the opposite effect.

SIP-420 introduced a new staking pool called the “420 Pool,” where users can delegate their stakes and earn rewards for supporting the network. The proposal decreased the collateralization ratio from 500% to 200%.

This increased the supply of sUSD, which outpaced demand, ultimately leading to a decline in its price.

This has been especially true for Curve pools, with sUSD now making up over 90% of the total supply. This has further led to a depreciation of the sUSD as it continues to lag in value compared to other cryptocurrencies. The Synthetix team has addressed the problem in the past but described it as a ‘transition phase.’

The depegging of sUSD has brought up some crucial questions about the stability of synthetic assets. This situation has left investors apprehensive, and the Synthetix team is yet to fully address the problem. The future of sUSD will depend on how the team handles the oversupply issue and rebuilds confidence in the stablecoin.