In a significant event in the cryptocurrency space, sUSD, the native stablecoin of the Synthetix protocol, experienced a value drop to $0.68 on April 18, 2025, representing a 31% deviation from its intended peg of 1:1 with the US dollar. Stablecoins are crucial for decentralized finance (DeFi) applications, designed to maintain a stable price as a reliable store of value. The sUSD depeg was triggered by a protocol shift (SIP-420) that lowered collateralization and disrupted peg-stabilizing incentives, weakening confidence in sUSD. SIP-420 aimed to boost capital efficiency by introducing a shared debt pool and increasing the collateralization ratio. The surplus of sUSD in the market, combined with declining SNX prices, further destabilized sUSD’s value. Synthetix’s recovery plan includes restoring incentives and adding pressure to stabilize sUSD’s peg. The recent depeg emphasizes the risks associated with crypto-collateralized stablecoins, such as reliance on collateral value, protocol design risks, market sentiment, incentive misalignment, and lack of redundancy. Users should diversify stablecoin exposure, monitor protocol changes, and stay informed about governance updates to mitigate risks.