Synthetix’s algorithmic stablecoin sUSD continues to struggle, dropping from its $1 peg. Following the implementation of a governance proposal known as SIP-420, which aimed to improve capital efficiency and user experience within the Synthetix ecosystem, sUSD has been experiencing a significant depegging event. Parsec research indicates that the introduction of a protocol-owned staking pool for SNX holders triggered a surge in sUSD supply. This change reduced the collateralization ratio from 500% to 200%, leading to roughly a 2.5x increase in sUSD issuance. This removal of a crucial stabilizing mechanism, where stakers were incentivized to purchase sUSD at a discount to settle their debt, has contributed to sUSD’s decline.