Synthetix’s sUSD Crash Below $1 Target Raises Stability Concerns

Synthetix stablecoin, sUSD, has fallen below its $1 target, reaching a new low of $0.66 this week. The digital asset has been under its expected value for over a month, and recent updates have made things worse. This drop has caused users to lose confidence and raised concerns about the stability of the Synthetix system. What Caused sUSD to Fall? The stablecoin started to drop after a big update to the Synthetix system went live on March 7. This update, called SIP-420, changed how debt worked in the system. Instead of users backing the stablecoin with their SNX tokens, a shared debt pool was created. This lowered the collateral ratio from 750% to just 200%. While this made the system more efficient, it also removed one way the peg stayed stable. Before, users were rewarded for buying cheap sUSD and using it to pay off their debts. Now, that reward is gone. Since then, sUSD has been falling. It dropped to $0.91 at the end of March and then to $0.66 in April. Although the stablecoin has recovered up to $0.83, it is still unstable. Community Members Raises Concerns and Cautions Kain Warwick, the founder of Synthetix, explained that sUSD is different from other stablecoins. Crypto tokens like SNX back it. In a recent X post, he admitted that its price is more unstable than coins like Tether’s USDT or DAI, but he believes there are tools to fix this. These tools are being updated, so the $1 value has dropped. Warwick said he is not worried and is even buying more SNX tokens. However, he also warned that things might get worse before they improve. Others are more concerned. Mrinal Thakur from the blockchain project said the system upgrade broke an important rule that kept the price stable. Now, there is no strong reason for people to buy cheap sUSD and help bring the price back to $1. He also said the pools holding sUSD are small and unstable, so even small trades can cause big price swings. Synthetix Aims to Fix sUSD The Synthetix team is working on short, medium, and long-term fixes. Currently, the protocol is adding more sUSD to Curve pools and rewarding people who use its Infinex platform. In the medium term, the team plans to introduce debt-free staking so users can repay debts individually again. For the long term, they want to control the sUSD supply better and offer new rewards for using it. The Synthetix treasury still holds about $30 million in sUSD and other stablecoins like USDC and OP. However, experts say the system is still weak. Even though the price has recovered slightly, the system is still under pressure. The post Synthetix’s sUSD Crash Below $1 Target Raises Stability Concerns appeared first on TheCoinrise.com .

Source: The Coin Rise