The Synthetix protocol’s native stablecoin, Synthetix USD (sUSD), fell to its lowest value in five years, extending a months-long struggle to maintain its $1 peg.

The asset has faced persistent instability since the start of 2025. On Jan. 1, sUSD dropped to $0.96 and only rebounded to $0.99 in early February. Prices continued to fluctuate through February before stabilizing in March.

On April 10, sUSD fell to a five-year low of $0.83, according to data from CoinGecko.

SUSD is a crypto-collateralized stablecoin. Users lock up SNX tokens to mint sUSD, making its stability highly dependent on the market value of SNX.

1-month price chart of Synthetix USD stablecoin. Source: CoinGecko

Synthetix USD’s “death spiral” risks

When the sUSD token dropped to $0.91 on April 1, Rob Schmitt, the co-founder of the risk tokenization platform Cork Protocol, explained the potential “death spiral scenario” of the stablecoin. 

Schmitt said the stablecoin’s design shares similarities with Terra’s TerraUSD (UST) stablecoin, which collapsed in 2022. While he noted key differences in collateralization and debt management, Schmitt said the fundamental risk remains:

“The death spiral scenario remains the same though, if the value of SNX drops sufficiently, sUSD is no longer fully backed. If fear of sUSD being unbacked triggers users to redeem sUSD for SNX and sell this, it creates further downwards pressure on SNX, creating a cascading deleveraging event.”

Despite the concern, Schmitt emphasized that such a collapse is unlikely due to Synthetix’s $30 million treasury, which holds about half of the outstanding sUSD debt. He said this reserve could be deployed against a spiral scenario.

“The biggest factor why sUSD won’t death spiral is because the Synthetix treasury hodls about $30 million of sUSD, which is about half the outstanding debt. To avoid a death spiral, this sUSD can be unwound,” Schmitt wrote. 

Synthetix founder Kain Warwick previously responded to the dips, saying that while he had feared a death spiral during the last seven years, he sleeps “great” these days.

He explained that the dips happened because the primary driver of sUSD buying had been removed. “New mechanisms are being introduced but in this transition there will be some volatility,” Warwick wrote. 

The Synthetix founder added that since sUSD is a pure crypto collateralized stablecoin, the peg can drift. However, the executive said there are mechanisms to push it back in line if it goes above or below its peg. “These mechanisms are being transitioned right now, hence the drift,” Warwick added. 

Cointelegraph approached Warwick for further comment but had not heard back by publication. 

Related: Ukraine floats 23% tax on some crypto income, exemptions for stablecoins

Stablecoin loses dollar peg amid market sell-off

Apart from sUSD, another stablecoin has also recently strayed from its dollar pegs as the crypto market has seen downturns. On April 7, Synnax Stablecoin (syUSD) dropped to $0.94. The project said concentrated sell activities temporarily caused a “slight deviation” from its dollar peg. The project said it was working on implementing a fully open redemption system. 

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