Synthetix's sUSD Stablecoin Slips to $0.90: Parsec Report Blames Governance Upgrade

Buckle up, crypto fans! A bombshell report from on-chain sleuths Parsec has just dropped, and it's pointing fingers at Synthetix's latest governance move for the wild ride their stablecoin sUSD has been on. Forget about bad debt or protocol meltdowns—this is all about SIP-420, baby!

sUSD, meant to be the cool, calm, and collected stablecoin pegged at $1, is now sweating it out at around $0.90. Yikes!

Parsec's deep dive shows that this nosedive started right after SIP-420 rolled out. This wasn't just any proposal; it was supposed to juice up staking and make capital efficiency smoother across the Synthetix (SNX) network. Big promises!

But here's the twist: SIP-420 ditched the old-school way where individual SNX holders minted sUSD and babysat their own debt. Now, they've got a protocol-owned staking pool, where everyone throws their stakes into one big pot. Sounds communal, right?

With this new setup, stakers are now chilling in a shared debt pool, with a much lower collateralization ratio—down from a hefty 500% to a leaner 200%. It's simpler, sure, but there's a catch: stakers no longer have a personal stake in keeping sUSD pegged.

“Stakers don't have skin in the game when sUSD trades off peg,” the report slams. “There’s no incentive to scoop it up cheap and pay off debt—because it’s not your debt anymore.” Ouch!

Influx of funds to the shared pool

Parsec's data shows over $80 million in SNX flooding into this shared pool, with a little help from a hyped-up campaign by Infinex. This cash influx has ballooned sUSD's supply, and now some Curve pools are stuffed with over 90% sUSD. With no real demand to soak up the surplus, the stablecoin's price is taking a beating.

The Synthetix crew isn't panicking, though. They're calling this a "transition period" and are hustling to hook up with Aave and Ethena to create new demand sinks. They're also throwing more incentives at Curve to help sUSD bounce back.

But Parsec's report isn't pulling any punches. It's clear that while SIP-420 might have made things more scalable and user-friendly, it's also yanked out a crucial stabilizer that used to keep sUSD glued to its $1 peg.