Synthetix’s decentralized stablecoin — known as Ticker sUSD SUSD
+0.46%
— fell below the $1 peg as sales volume increased on the decentralized exchange.
Stablecoins are issued through Synthetix, a DeFi protocol that enables the creation of synthetic assets or synths. It aims to maintain a 1:1 peg to the US dollar, be issued as a loan, and be overcollateralized with crypto assets.
The market capitalization of the stablecoin is over $50 million. On Thursday, sUSD fell to $0.92 before recovering to $0.96 at the time of writing, data shows.
Chaos Labs, the risk manager for the Aave lending protocol, confirmed that the depeg was triggered by a major liquidity provider withdrawing from the sBTC/wBTC liquidity pool on the Curve decentralized exchange. These LPs received sUSD earned through spot synth redemptions from Synthetix and sold them in the corresponding Curve liquidity pool.
Synthetix implemented ‘SIP-2059’ in late April. According to Chaos Labs, this led to the deprecation of non-sUSD spot synths on the Ethereum mainnet, effectively ending atomic exchanges for synths like sETH and sBTC. As a result, users will have to exchange these synths for sUSD, he added.
sUSD price chart | the block
“87 BTC was deposited into the sBTC/WBTC curve pool to relatively dormant addresses over several months in 2023,” Chaos Labs said. “The liquidity in this pool is heavily concentrated, with three accounts providing most of the liquidity, including this early user.”
Following the liquidity withdrawal, the sBTC token was temporarily pegged between 0.93 and 0.94 against WBTC, but has since adjusted back to 0.96. The user then exchanged sBTC for sUSD, raising a total of 4.48 million sUSD. Users then continued to sell sUSD from the sUSD curve pool while exchanging other assets to maintain BTC exposure, causing sUSD to fall further to $0.93.
In response to the ongoing depeg and market volume, Chaos Labs has recommended the Aave community temporarily freeze sUSD holdings in Aave V3 on Optimism to mitigate further market impact and is evaluating other indicators as a precautionary measure.
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