Synthetix’s sUSD stablecoin sees continued depeg to $0.86

This is a segment from the 0xResearch newsletter. To read full editions, subscribe.

What happens when a stablecoin isn’t stable, and the founder’s response is “no crying in the stablecoin casino”?

The vibes in the Synthetix and Infinex Discords are down bad. So is sUSD, the Synthetix-native stablecoin, which dropped below $1 in March, but today has slipped dramatically below $0.90 — hitting a low (so far) of about $0.835.

While founder Kain Warwick insists that this is temporary and that the overcollateralized stablecoin is fundamentally safe, the community’s patience is wearing thin. So is its trust.

The root of the problem? The 420 pool, an upgrade that made sUSD more capital-efficient by letting a pooled SNX staking system mint sUSD at a lower 200% collateralization ratio. In the process, it also forgave $60m in staker debt over 12 months — removing the reflexive peg defense that previously incentivized stakers to buy discounted sUSD to repay debt. That incentive is now gone. And so is the peg.

While the protocol hasn’t sold sUSD, according to Warwick, the new issuance mechanics have flooded liquidity pools, skewing Curve’s sUSD stableswap pools 90%+ toward sUSD. Users trying to exit are getting crushed. One posted a screenshot showing a USDC/sUSD LP with literally 0% USDC remaining.

There are about 51 million sUSD in circulation between Ethereum mainnet and Optimism, according to CoinGecko.

Infinex, the frontend product meant to onboard normies, hasn’t helped. It launched an incentive campaign to hold sUSD in the Infinex wallet not long before the depeg, which has been renewed twice. Now Infinex wants people to stack SNX to farm even more rewards. This has users fuming.

“You guys promote sUSD through campaigns, you take responsibility,” wrote one user on the Infinex Discord.

“Liquidate the collateral and get out of the damn stablecoin business,” wrote another on the Synthetix Discord.

Kain’s replies? A mix of sarcasm and stoicism.

Fair or not, it’s a tough look as users are down 13% on what was marketed as a stable asset.

So…what now?

If you bought sUSD for yield expecting stability, you’re in damage-control mode.

Short-term: The peg won’t snap back quickly. No active treasury buybacks, no peg-stabilizing module yet.

Exit now if you need capital or can’t stomach further drawdown, or
Hold and wait if you believe the peg will recover to $0.95+ via incentives, integrations or treasury action.

Or maybe you’re considering buying now, fancying yourself a distressed asset investor.

This is obviously a speculative trade, not a passive stablecoin yield play. A bet on recovery assumes:

SNX price holds or rebounds (key to overcollateralization premise).
The team executes on liquidity and incentives.
The peg restoration becomes a top short-term priority.

A slow grind back to $0.99 is plausible — but so is more chop around $0.85–$0.90 if treasury action lags.

While sUSD isn’t Terra, it’s showing some of the same reflexive fragility. Overcollateralization only helps if the market believes it. Right now, confidence is depegged about as much as price is, and until that’s restored, the status quo will remain.

The “s” in sUSD may really stand for “Synthetix,” but this week, it sure feels more like it stands for “suspect” or “suffering.”

Get the news in your inbox. Explore Blockworks newsletters:

The Breakdown: Decoding crypto and the markets. Daily.
Empire: Crypto news and analysis to start your day.
Forward Guidance: The intersection of crypto, macro and policy.
0xResearch: Alpha directly in your inbox.
Lightspeed: All things Solana.
The Drop: Apps, games, memes and more.
Supply Shock: Bitcoin, bitcoin, bitcoin.