On May 16, the “synthetic” stablecoin from Synthetix – sUSD – lost its peg to the US dollar, falling to $0.915.
At the time of writing, the asset price on the decentralized exchange (DEX) Uniswap has recovered to $0.965.
The stablecoin is issued through the Synthetix DeFi protocol, which allows the issuance of “synthetic” assets in the Ethereum ecosystem, for which sUSD acts as collateral.
According to CoinGeckothe market capitalization of the “stable coin” is more than $50 million.
Risk Manager for Aave Lending Protocol, Chaos Labs, determined cause of depeg. According to analysts, the deviation from the dollar occurred after a large liquidity provider (LP) exited the pool sBTC/wBTC on DEX Curve.
The LP converted the assets into sUSD via spot redemption on Synthetix and then traded them into the Curve pool. This caused a chain reaction that shook the stablecoin peg.
Chaos Labs explained that on April 29, the Synthetix community accepted SIP-2059, which effectively stopped supporting spot synthetic assets on the Ethereum network, except for sUSD. Therefore, protocol participants have to redeem sBTC and sETH for a “stable coin”.
After the liquidity withdrawal, the ratio of “synthetic” BTC to wBTC temporarily decreased to 0.93–0.94, but later returned to 0.96. The LP then exchanged his sBTC for 4.48 million sUSD.
After this, he began selling stablecoins in the Curve pool to maintain his collateral. Over the course of several hours, the sUSD rate gradually deviated as coins were sold.
The LP still owns 1.76 million sUSD, which can be sold once the exchange rate recovers, experts say.
The Chaos Labs team has recommended that the community temporarily freeze sUSD reserves in Aave v3 on Optimism to mitigate further market impact and conduct a more thorough assessment of the situation.
Experts emphasized that the incident has not yet caused much damage. Total sUSD liquidations at the time of valuation were approximately $2,398.
Let us recall that in January, the TrueUSD stablecoin lost parity with the US dollar, falling by 1.3% to $0.984.
In April, the USDP rate from Paxos jumped above $1.18. The loss of the peg resulted in a liquidation of 529,000 USDC from one of the traders.
Source: Cryptocurrency
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