Urgent Alert: Upbit, Bithumb Suspend Synthetix (SNX) Deposits Over sUSD Risks
The cryptocurrency market is often dynamic, and recent developments in South Korea involving major exchanges have caught the attention of investors holding Synthetix (SNX) tokens. Two of the country’s largest platforms, Upbit and Bithumb, have taken significant action regarding SNX deposits, citing potential risks.
Why Did Upbit and Bithumb Suspend SNX Deposits?
The decision by Upbit and Bithumb to suspend Synthetix (SNX) token deposits stems from a cautionary designation issued by the Digital Asset Exchange Alliance (DAXA). DAXA is a self-regulatory body in South Korea that sets standards for local crypto exchanges.
DAXA flagged SNX as a ‘cautionary item’ due to concerns surrounding the Synthetix USD (sUSD) stablecoin. sUSD is collateralized by SNX tokens, and its recent failure to maintain its dollar peg has raised alarms about potential volatility and investor risk.
Understanding the sUSD Depeg Situation
The core issue behind the exchanges’ actions is the depegging of sUSD. Here’s a quick look:
- sUSD is a stablecoin designed to track the value of the U.S. dollar.
- It uses Synthetix (SNX) tokens as collateral.
- In recent weeks, sUSD has struggled significantly to hold its $1 peg, dropping to lows around $0.68.
- This depeg event raises concerns because if the value of the collateral (SNX) is affected by the stablecoin’s instability, it could impact the broader Synthetix ecosystem and SNX holders.
Some observers have drawn comparisons, albeit with important distinctions, between sUSD’s situation and the collapse of Terra USD (UST) in 2022, another stablecoin that lost its peg.
What Actions Have Exchanges Taken?
Following DAXA’s designation, several South Korean exchanges have implemented measures:
- Upbit: Suspended SNX token deposits and added a trading caution tag. The exchange stated it was monitoring the sUSD depegging and noted a potential lack of use cases for SNX contributing to investor risk. Upbit will conduct a review to decide on future support, including potential delisting.
- Bithumb: Also blocked SNX deposits and added a cautionary tag. Bithumb indicated that restrictions could be lifted if the underlying issues causing the designation are resolved.
- Korbit and Coinone: Issued investor alerts and added cautionary tags to SNX, urging traders to exercise caution.
How is Synthetix Addressing the sUSD Depeg?
The team behind Synthetix is aware of the sUSD depeg issue and is reportedly working on solutions. They have short, medium, and long-term plans to mitigate risks.
Synthetix founder Kain Warwick recently issued a strong message to SNX stakers, urging them to adopt a new staking mechanism designed to help fix the sUSD depeg. He suggested that pressure might be applied if there isn’t sufficient participation in the new mechanism.
Following this warning, the price of sUSD saw a modest increase, briefly reaching $0.87, but it has not yet fully recovered its dollar peg.
Key Takeaways for Investors
The actions by Upbit and Bithumb highlight the regulatory scrutiny placed on crypto assets, particularly those linked to stablecoins experiencing instability. The sUSD depeg is a critical event for the Synthetix ecosystem, impacting the SNX token used as collateral.
Investors holding or considering trading SNX on South Korean exchanges should be aware of the cautionary tags and deposit suspensions. The ongoing review by exchanges like Upbit could lead to further actions, including delisting.
Conclusion
The suspension of Synthetix (SNX) deposits by major South Korean exchanges Upbit and Bithumb underscores the sensitivity of the market to stablecoin stability issues. The sUSD depeg has triggered regulatory caution and exchange action, putting the spotlight on the Synthetix protocol and its native token. While the Synthetix team is working on resolving the sUSD depeg, the situation remains fluid, and investors should proceed with caution.
