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- Stablecoin sUSD is trading below $1 as Kain Warwick has prompted SNX stakers to intervene and save the stablecoin.
- Warwick introduces the 420 Pool, offering 5M SNX rewards for staking sUSD and easing sell pressure.
- SIP-420 protocol update flooded the sUSD market, leading to a depeg; Warwick believes SNX stakers hold the solution.
Synthetix’s sUSD has been trying to find the $1 peg for a long time, and now it experiences a disappointing trend as it is trading below that price point for several weeks. SNX founder Kain Warwick has again called on stakers in the protocol to come to the rescue and help stabilize the algorithmic stablecoin. The situation has been on for a while, and the Synthetix team has initiated a new liquidity drive in an effort to seek a solution.
Warwick further explained in a post on X on April 21 that SNX stakers must act through the new 420 Pool. This campaign enables the holders of the SNX token to stake their sUSD for 12 months for a chance at a 5 million SNX reward. It helps to decrease the amount of sUSD in circulation and remove downward selling pressure that has forced the stablecoin away from its intended $1 peg.
Improving sUSD Procedures
Warwick admitted that the current procedure of transferring sUSD to a contract is not perfect. But expects that the upcoming new interface will enhance their contribution. He pointed out that if stakeholder involvement remains low. The protocol may likely move to the level of incentives, followed by enforcement. However, Warwick called for much action to be taken on the ground to avoid further vulnerabilities. Warwick stated
“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.”
His statement implies that the more the community participates, the better for the protocol. Otherwise, he threatens to introduce further measures.
sUSD Capital Activation
Thus, the root of the sUSD depeg issue can be traced to the protocol update known as SIP-420. It lowers the collateral factor from 500% to 200% in an effort to increase capital efficiency. Which then causes the supply of sUSD to way outstrip the demand. The stablecoin tumbled and is currently trading at a lower price, with its value standing at $0.7740. Below the 24-hour trading range of 2.58%.
Nevertheless, Warwick is sure that the matter is all about activating the capital of SNX stakers. He also mentioned that people have billions of dollars of net worth locked in SNX through staking. He also pointed out that a more refined stimulus is required to optimize this capital. And bring stable development to sUSD. Warwick is confident that with appropriate changes, the problem will be solved. Synthetix protocol will return to focusing on Layer 1 perpetual contracts.
Both USDCoin and TUSD have been hit by depegging problems in the past. But Warwick is convinced that Synthetix is capable of coming out of its problems. He is certain to ensure the protocol is brought back to its growth trajectory.
