As sUSD continues to trade below its intended $1 peg, Synthetix founder Kain Warwick has urged stakers to step up and help restore stability before more stringent measures are implemented.
The depeg has stretched on for weeks, triggered by recent changes to how sUSD is issued and backed. While the team has already rolled out a new liquidity initiative to address the issue, the response so far hasn’t been enough to turn the tide.
In an April 21 thread on X, the Synthetix founder urged SNX stakers to take action through its new staking mechanism, warning that the current goodwill-driven approach may soon give way to tougher enforcement.
The new initiative, called the 420 Pool, offers SNX holders a chance to earn a share of 5 million SNX tokens by locking their sUSD for 12 months. Warwick is banking on this long-term commitment to help absorb excess supply and ease the sell pressure that’s been dragging sUSD away from its peg.
Warwick said the current process, which involves sending sUSD directly to a contract, is “extremely not ideal,” but suggested that once the user interface goes live in the coming days, staker participation will be closely watched.
If engagement remains low, he warned, the protocol may shift from incentives to enforcement.
“We tried nothing which didn’t work, now we have tried the carrot and it kind of worked but I’m reserving judgement. I think we all know how much I like the stick so if you think you will get away with not eating the carrot I’ve got some bad news for you,” Warwick said.
sUSD is an algorithmic stablecoin issued through the Synthetix protocol, backed by the platform’s native SNX token. Unlike fiat-collateralised stablecoins, sUSD maintains its peg using crypto-based collateral and price feeds from Chainlink oracles, making it more sensitive to changes in protocol mechanics.
The sUSD depeg can be traced back to a major protocol update, known as SIP-420. Introduced to boost capital efficiency, it slashed the collateral ratio for minting sUSD from 500% to 200% and moved to a shared, protocol-owned staking pool.
While SIP-420 made it easier to mint sUSD, it also flooded the market faster than demand could catch up, throwing off liquidity balances and pushing the stablecoin well below $1. At press time, it was trading at $0.7714 and was down 4.2% in the past 24 hours.
Warwick believes the solution lies in mobilizing existing capital within the ecosystem.
“The collective net worth of SNX stakers is like multiple billions the money to solve this is there we just need to dial in the incentives. We will start slow and iterate but I’m confident we will resolve this and get back to building perps on L1,” he added.
sUSD isn’t the first stablecoin to lose its peg. In March 2023, Circle’s USDC briefly fell to $0.87 after revealing that $3.3 billion of its reserves were tied up in the collapsed Silicon Valley Bank.
More recently, TUSD lost its peg to the U.S. dollar in January amid reports that its issuer failed to promptly release a collateral audit.
