sUSD struggles to regain $1 peg as Synthetix deploys recovery measures post SIP-420

The Synthetix Summé algorithmic stable continues to derive from its ankle of $ 1, currently negotiating at $ 0.90.

Depgeging began in March, Susd sliding briefly below $ 1, but the situation worsened after the implementation of the SIP -420 – a governance proposal aimed at improving the effectiveness of capital and simplifying the user experience in the synthetix (SNX) ecosystem. According to Parsec searchThe implementation of the SIP-420 inadvertently caused a strong increase in the SUSD supply, which sparked the current Depeg.

More specifically, SIP-420 introduced a protocol staking POOL, allowing SNX holders to delegate their markup to a shared pool rather than managing their own debt and making SUSD’s reduction. The new configuration has lowered the guaranteed rate Parsec. This has removed the Stablecoin stabilization mechanism – Incituiting individual stakers to buy Susd at a discount to repay their debt when the price falls below PEG.

Now, with the debt grouped, stakers essentially have no skin in the game to restore the ankle. Combined with the fact that the Pool 420 now contains more than $ 80 million in SNX, the SUSD offer has widened considerably, with some curved liquidity pools containing more than 90% SUSD. Without immediate demand to balance this increased offer, SUSD’s price continues to drop.

To worsen things, Infinex started to encourage SUSD’s holding in the infinex portfolio just before the start of the start. However, these incentives have led to more liquidity in the system without corresponding request. As a user on the Discord canal of Infinex wrote“You promote SUSD through campaigns, you take responsibility.”

The Synthetix team has reassured users, which is a “transition period”. They work to create new demand wells, such as Aave (GHOST) and Ethena (This one) Integrations, to counterbalance the excess offer of SUSD. In addition, they promised to strengthen incentives for liquidity pools, in particular on the curve, to restore stability.

To summarize, the SIP-420 upgrade brought an effectiveness of capital and a simpler UX to Synthetix, but it removed the organic reflexive stabilizer of PEG, which led to the Susd Depeg as a side effect. By switching to an ignition pool belonging to a protocol and lowering the warranty report, SIP-420 led to an increase in SUSD’s supply without sufficient demand to counterbalance it. It caused the stable In Depeg, the price currently oscillates about $ 0.90. This means that SUSD holders end up with a choice: to go out now or hold and wait for complete recovery.