"Synthetix USD Stablecoin Crisis: Drops Below $1 after 5 Years"

Synthetix USD stablecoin loses dollar peg, drops to 5-year low of $0.83

The Synthetix protocol’s native stablecoin, Synthetix USD (sUSD), recently plummeted to its lowest value in five years, continuing its ongoing struggle to maintain its $1 peg.

Since the beginning of 2025, the asset has experienced significant instability. It dropped to $0.96 on Jan. 1 and only managed to rebound to $0.99 in early February. Prices continued to fluctuate throughout February before finally stabilizing in March.

According to data from CoinGecko, on April 10, sUSD hit a five-year low of $0.83.

SUSD is a crypto-collateralized stablecoin, where users lock up SNX tokens to mint sUSD, making its stability heavily reliant on the market value of SNX.

Synthetix USD’s “death spiral” risks

When sUSD dropped to $0.91 on April 1, Rob Schmitt, co-founder of the risk tokenization platform Cork Protocol, warned about the potential “death spiral scenario” of the stablecoin.

Schmitt highlighted similarities between sUSD's design and Terra’s TerraUSD (UST) stablecoin, which collapsed in 2022. Despite differences in collateralization and debt management, he cautioned that the fundamental risk persists:

“The death spiral scenario remains the same though, if the value of SNX drops sufficiently, sUSD is no longer fully backed. If fear of sUSD being unbacked triggers users to redeem sUSD for SNX and sell this, it creates further downwards pressure on SNX, creating a cascading deleveraging event.”

However, Schmitt pointed out that the collapse scenario is improbable due to Synthetix’s $30 million treasury, which holds approximately half of the outstanding sUSD debt. This reserve could be utilized to mitigate a spiral scenario.

Synthetix founder Kain Warwick addressed the recent dips, acknowledging concerns about a death spiral but expressing confidence in the project’s resilience.

Warwick explained that sUSD's dip was caused by the removal of the primary driver of sUSD buying. He reassured that there are mechanisms in place to realign the peg if it deviates. Warwick attributed the current drift to the introduction of new mechanisms.

Stablecoin loses dollar peg amid market sell-off

Alongside sUSD, another stablecoin, Synnax Stablecoin (syUSD), also experienced a deviation from its dollar peg due to market downturns. On April 7, syUSD dropped to $0.94 as a result of concentrated sell activities. The project is working on implementing a fully open redemption system to address this issue.