Synthetix USD lost the 1 USD mark, bottom out 5 years

The Synthetix USD stablecoin (sUSD) of the Synthetix protocol has reached its lowest level in 5 years, continuing a streak of struggles to maintain the exchange rate of 1 USD.

Since the beginning of 2025, the price of sUSD has been continuously unstable. On January 1, this stablecoin dropped to 0.96 USD and only recovered to 0.99 USD at the beginning of February. The price continued to fluctuate throughout February before temporarily stabilizing in March. However, by April 10, sUSD had dropped to 0.83 USD – the lowest level in 5 years, before slightly increasing to 0.86 at the time of writing.

SUSD is a stablecoin backed by cryptocurrency. Users must lock SNX to mint sUSD, making its stability largely dependent on the market value of SNX.

1-Month Price Chart of sUSD | Source: TradingView## The Risk of the "Death Spiral" for Synthetix USD

When sUSD dropped to 0.91 USD on April 1, Rob Schmitt – co-founder of the risk crypto platform Cork Protocol – warned of the risk of a "death spiral" for this stablecoin.

Schmitt compares the design of sUSD with TerraUSD (UST) from Terra – the stablecoin that collapsed in 2022. Despite some differences in collateral mechanisms and debt management, he still emphasizes the core risk:

"A death spiral can still occur. If the value of SNX decreases enough, sUSD will no longer be fully collateralized. When users fear that sUSD will lose value, they will exchange it for SNX and sell it, putting downward pressure on SNX, creating a chain liquidation effect."

Nevertheless, Schmitt noted that a collapse scenario is unlikely due to Synthetix's reserve of 30 million USD – equivalent to half of the total sUSD debt in circulation. This fund could be used to prevent a death spiral.

"The biggest reason why sUSD has not fallen into the death spiral is that the Synthetix treasury holds about 30 million USD sUSD – equivalent to half of the total debt. If necessary, this amount can be released to stabilize the situation."

The founder of Synthetix, Kain Warwick, has also spoken about the volatility of sUSD. He mentioned that over the past 7 years, he has often worried about the risk of a death spiral, but now he can "sleep well."

According to Warwick, the reason sUSD became unbalanced is because the main buying incentive for sUSD has been removed.

"New mechanisms are being implemented, but during this transitional phase, there will be fluctuations."

Warwick emphasized that because sUSD is a stablecoin fully collateralized by cryptocurrency, the exchange rate may fluctuate, but the system has mechanisms to bring it back to the 1 USD mark when it exceeds or falls below.

"These mechanisms are currently being adjusted, so the exchange rate is deviating from the benchmark."

Stablecoin depreciation in the context of a market sell-off

Not only sUSD, another stablecoin also lost its peg to 1 USD as the cryptocurrency market declined.

On April 7th, Synnax Stablecoin (syUSD) dropped to 0.94 USD. The project stated that the cause was a large amount of centralized sell orders, causing the exchange rate to be "slightly deviated" from the peg of 1 USD. The development team is working to implement a fully open reward exchange system to address this situation.

Disclaimer: This article is for informational purposes only and is not investment advice. Investors should do thorough research before making any decisions. We are not responsible for your investment decisions

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Justin

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