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Synthetix (SNX) up Over 50% in 2023 Despite Recent dip



Market chart in red theme

The crypto market extended its losses on Thursday as the total market cap dropped 1% to now stand at $1.15 trillion. This is due to most cryptocurrencies trading in red as investors continue to be worried about the U.S. debt ceiling stalemate.

Meanwhile, the recent release of the most recent FOMC minutes shows that the U.S. central bankers are divided on a continuation of interest rate hikes, which is not helping the market sentiments.

Bitcoin price dropped under $26k before recovering to now trade at $26,400. The largest cryptocurrency has its first support level at $25,600 and second at $25,200, while resistance is present at $26,650 and then at $27,300.

Akin to this, Ether dropped below $1,770 earlier in the day and is now exchanging hands at $1,802. Currently, the major market oscillators are pointing to a neutral sentiment for the overall crypto market.

Not only is there no fresh capital in the market, but what has already been here is also draining from the crypto space, as evident from the stablecoin market, which is on pace to shrink for the 14th consecutive month. This is a sign of deteriorating liquidity and signals a troubling trend for the recovery of crypto asset prices.

Last week, banking giant JPMorgan wrote that crypto prices are unlikely to enjoy a sustained recovery until the stablecoin market stops shrinking. Similarly, a report from Goldman Sachs said earlier this year that the stablecoin contraction is equivalent to a sort of quantitative tightening for the crypto market.

The total market cap of stablecoins has fallen to the lowest level since Sep. 2021 at $130 billion, as per CCData. Trading with stablecoins has also declined 40.6% this month to $460 billion in volume on centralized exchanges, the lowest monthly volume since Dec. 2022.

“The drop in trading volume comes with major crypto assets staying range-bound and failing to break key support and resistance levels,” the CCData report said.

Much like other altcoins, the SNX token has also been struggling and is one of the biggest losers among the top 100 cryptocurrencies in the past 24 hours.

SNX Records Most Loses in the Latest Turbulence

SNX is the 64th largest cryptocurrency with a market cap of just over $739 million that plummeted by about 9.5% in value while managing $66.4 million in 24-hour trading volume. As of writing, SNX has been trading at $2.32.

Before SNX became the biggest loser later in the day, SNX's losses were highest, only second to Kava which is down by 8.5%. However, KAVA losses came after an over 65% uptrend in the last two weeks compared to a 25% spike in the price of SNX during this duration.

The price of SNX is also down 4.8% in the past 30 days and 12% in the past year. It has further lost 92% of its value since hitting its all-time high (ATH) at $28.53 in Feb. 2021. However, the token is nowhere near its all-time low of $0.035 in Jan. 2019 and is up 53.76% in 2023.

SNX has actually been making some developments recently that helped its price surge, which pushed it into the overbought territory and right above the RSI's mid-level. There has also been a spike in volume and daily active addresses during this time. But the jump in price had the supply held by top addresses seeing some outflows as well as an increase in the supply held on exchanges which indicated profit taking and created a selling pressure.

While the latest red price action results from a broad downturn in the crypto market and short-term profit-taking, the token did outperform some of the top cryptos, including Bitcoin and Ethereum, earlier this month.

Just this week, the Synthetix network announced that it has added perps support for more crypto assets, which may create more utility for the SNX token.

Among these assets were a few meme coins, which have been in high demand lately. By announcing on-chain futures options support for such assets, Synthetix is tapping into the excitement around these assets. Strong demand for these newly supported perps can then fuel even more utility for the SNX token.

Synthetix also launched support for XRP, Polkadot (DOT), Sui Network (SUI), Injective Protocol (INJ), Blur, and Floki Inu (FLOKI) perpetual contracts. In total, more than 40 perps are available for trading on the platform.

SNX token holders can access the perpetual markets on various SNX-integrated derivatives trading protocols, including Kwenta, Polynomial, Decentrex, and dHEDGE.

Amidst this, Synthetix Network recorded a massive spike in Total Value Locked (TVL). From $246.36 million at the beginning of the year, the TVL has almost doubled to $428.13 million year-to-date (YTD), as per DeFi Llama. However, it is nowhere near the $2.4 bln peak in Feb. 2021.

Click here to learn all about investing in Synthetix (SNX).

Role of Synthetix in the Synthetic Asset Space

Originally named Havven, Synthetix was founded by Kain Warwick in 2017 as a collateral-backed stablecoin issuer. The project raised around $30 million in 2018 by selling 60 million HAV tokens through an ICO. By the end of that bear market, Havven changed its name to Synthetix to broaden its objectives to the formation of synthetic assets for crypto, fiat currencies, and commodities.

Following the transition to Synthetix, the team introduced the “Synthetix Improvement Proposal” (SIP), which enables SNX holders to vote on changes to the protocol. In March 2019, the community voted to incentivize the minting of synths (synthetic assets) using an inflation mechanism.

Built on the Ethereum blockchain, Synthetix (SNX) is a decentralized finance protocol that provides services without needing any intermediary. Synthetix is primarily used to create synthetic assets, also known as “synths,” which are a combination of assets with the same value as another asset.

These synthetix cryptocurrencies provide exposure to a wide variety of crypto as well as non-crypto assets such as gold, silver, and euros, enabling users to participate in the DeFi ecosystem without needing to hold the underlying assets. For this, synths use oracles, which are smart-contract-based price discovery protocols that permit users to hold and exchange the underlying assets.

SNX is the native token of Synthetix Network, which is necessary to create synths. To mint new synths, users have to lock up their SNX tokens. These synths can be integrated into other DeFi platforms and provide liquidity and earn yield.

By staking their tokens, users earn weekly rewards from SNX transaction fees for participating in and collateralizing the network. This way, SNX holders create and issue synth tokens and, at the same time, maintain the price of the SNX token by locking their SNX into smart contracts. There are a total of 240 million SNX tokens.

Early in 2021, Synthetix had a $12 million funding round that included Coinbase Ventures, Paradigm Capital, and IOSG Ventures. These venture capital firms purchased SNX tokens directly from the platform's treasury.

Then in July 2021, Synthetix announced the launch of its layer 2 integration with Optimism, and two months later, Lyra announced a blockchain-based rewards program using Synthetix's sUSD stablecoin. At this time, the number of addresses holding SNX tokens reached an ATH of 100k.

In March this year, Synthetix secured another $20 mln investment through a new partnership with Web3 investment and quantitative trading firm DWF Labs, which acquired $15 mln worth of SNX tokens paid for with USDC and committed to purchasing another $5 mln worth of SNX tokens. As part of the deal, DWF Labs was responsible for increasing SNX liquidity as well as market-making across CEXs and DEXs, while Synthetix perpetual futures were integrated into DWF Labs' trading business.

12 Significant Proposals for Synthetix

A big development for the project this week came in the form of its founder Kain Warwick proposing 12 different governance suggestions to propel the platform into its next phase. As outlined in Warwick's “State of Synthetix” post, these initiatives aim to broaden Synthetix's capabilities and stimulate increased participation from its community members.

One of the significant propositions is the “SNX split and buyback” proposal, under which Warwick suggested a 3:1 split of SNX, followed by a buyback and subsequent burn using the Treasury's fee yield.

While the platform still requires some inflation for incentives and liquidity for pools, Warwick said it doesn't negate having a countervailing force of buyback and burn.

“Should we proceed with a 3:1 split, we would have approximately 90 million additional tokens for buyback and burn, with a market price of $60 million,” he explained.

Based on the yield the Treasury Council (TC) is currently earning, which is around $5 mln per year, if it is completely allocated to buybacks, it would take about ten years to complete, which could be reduced significantly if trading volume increases over the next few years, he added.

Besides the buyback, the founder has also proposed the “core contributor alignment,” through which it seeks to incentivize project contributors by distributing SNX tokens as quarterly bonuses. With this strategy, the idea is to secure a commitment from the platform's contributors to the protocol's success.

Another proposal involved the allocation of SNX for trading incentives in order to stimulate trading volume and foster increased market activity on the Synthetix platform. Beyond this, he suggested rewarding stakers with SNX to boost their involvement and commitment to preserving the platform's stability.

Currently, these are only suggestions and, in the conceptual stage, need votes to progress. The purpose of presenting proposals, according to Warick, was to start a conversation and ensure the Synthetix community was in the know about the potential directions for the platform.

The proposals will now be put to a vote by the TC, which is Synthetix's four-member governance body and is responsible for resource allocation for the protocol's expansion and growth.

“Nothing has been confirmed by a Treasury Council vote yet; however, many of these proposals have garnered support within the (council),” said Warwick.

Click here to learn how to buy Synthetix (SNX) in just four steps.

Gaurav started trading cryptocurrencies in 2017 and has fallen in love with the crypto space ever since. His interest in everything crypto turned him into a writer specializing in cryptocurrencies and blockchain. Soon he found himself working with crypto companies and media outlets. He is also a big-time Batman fan.

Gaurav started trading cryptocurrencies in 2017 and has fallen in love with the crypto space ever since. His interest in everything crypto turned him into a writer specializing in cryptocurrencies and blockchain. Soon he found himself working with crypto companies and media outlets. He is also a big-time Batman fan.