Synthetix’s sUSD stablecoin has fallen to $0.66, representing a more than 30% drop below its intended $1 peg, exacerbating a month-long trend of depegging that raises concerns about the protocol’s stability. Synthetix founder Kain Warwick emphasized that sUSD is a crypto-collateralized stablecoin, highlighting its instability as a temporary issue related to recent design changes that reduced the collateralization ratio from 750% to 200%. This shift significantly weakened the incentives for holders to buy cheap sUSD to repay debts, according to Mrinal Thakur of the blockchain ecosystem Okto. Liquidity has become a challenge, with high volatility leading to substantial price swings. Synthetix is attempting to improve liquidity with additional incentives and medium-term fixes aimed at management of sUSD supply, while long-term solutions include new adoption incentives. Despite the ongoing instability, Warwick remains optimistic but acknowledges potential further declines.

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