If you often explore DeFi, you will find that in the high-yield pools on Curve/Convex, there is always a trace of sUSD. However, upon closer inspection, one might hesitate because sUSD has long been unpegged (currently at $0.86). In the absence of buying pressure and insufficient market confidence, simply continuing to increase pool incentives and urging others to join is futile.

Synthetix can be considered an old DeFi OG. Its mechanism has actually remained unchanged over the years, which is to issue synthetic assets through over-collateralization of its native token, providing them for trading within the ecosystem.

As the bear market arrives, times are tough. The price of SNX has dropped, collateral ratios have declined, funds have withdrawn, and TVL has entered a negative spiral. The scale of sUSD has also fallen from over $300 million at the peak of the last cycle to just over $20 million now, resulting in a significant contraction of the ecosystem.

Although sUSD is still over-collateralized at present, with approximately $70 million of SNX still staked, theoretically, the current market price is undervalued, but no one dares to arbitrage.

In March 2025, Synthetix launched a new mechanism called the 420 Pool, aimed at simplifying staking and improving capital efficiency. However, because users no longer need to manage and hedge their debt positions themselves, stakers lose the incentive to buy sUSD at low prices for debt repayment. If someone initiates an attack on the price of sUSD, it will become passive.

To re-peg sUSD, large-scale destruction of sUSD is necessary, along with unstaking SNX, but this also means that the game for sUSD might be coming to an end. Continuous unpegging and destruction would lead the quantity of sUSD to zero.

However, the deeper issue lies in the mechanism of Synthetix: issuing synthetic assets through staking its native SNX has limited scalability and can only succeed in favorable conditions. At the peak in 2021, the scale of sUSD was only $300 million. How much ecosystem and revenue can it support? In contrast to other stablecoins which easily reach tens or hundreds of billions in scale, it simply cannot compete.

The bear market following the collapse of LUNA in 2022 was actually the best opportunity for Synthetix to transform, such as by introducing external collateral assets, but this opportunity has been missed.