Synthetix Network Token (SNX) on Spotlight

Decentralised Finance or DeFi is an emerging ecosystem divided into multiple sub-sectors, including lending, decentralised exchange (DEX), payment protocols, stablecoins, crypto synthetic assets, etc. Each sub-sector plays a crucial role in revolutionising legacy finance and bringing a new order to the global financial system. 

In this edition of coin spotlight, we will be discussing Synthetix Network. This blockchain-based crypto synthetic asset platform is helping to bridge the gap between the traditional market and the crypto market. It’s an exciting crypto project with a lot of growth potential. 

SNX is the native token of Synthetix Network. Currently trading at $5.62 level (₹446.79), the coin has given up all the gains, and returns are flat for the past year. It made an all-time high level of $28.77 (₹2127.40) during the past year. 

Key Coin Metrics

• Coin Rank: 121
• Coin Market Capitalisation (as of 23rd Dec 2021): $644 million
• Market Dominance: 0.03%
• Coin Economics: Inflationary
• Inflation Rate: From September 2023, an annual terminal inflation rate of 2.5% for perpetuity
• Total Circulating Supply: 114.84 million (54% of the planned total supply)

SNX is a liquid token with a 24-hour trading volume ranging between $50-90 million, which is over 10% of the free-float market cap. 

Technical Analysis: SNX Price Prediction

source: tradingview

After weeks of weakness and underperformance, there seems to be a trend reversal on the daily charts. In the Bollinger band indicator, SNX price has crossed above the 20 day SMA (red line), and the band is narrowing down as it moves forward, which increases the likelihood of sharp price movement. 

The MACD and RSI indicators also indicate a change in momentum in the price pattern of the SNX. To confirm the trend reversal, SNX needs to convincingly (good volume) break above $5.68 (₹451) and $7.35 (₹580) levels.

Disclaimer: Insights mentioned above are time sensitive—kindly DYOR for being safe.

A Brief About Synthetix Network

Synthetix Network is an Ethereum based blockchain protocol to mint crypto synthetic assets. Also known as synths, crypto synthetic assets are the tokenised clone of any financial or digital asset on the blockchain, which can be traded and exchanged across crypto exchanges. The synths track the underlying asset’s price and allow you to profit from trading that asset without requiring you to hold that asset. 

Synthetic Network is one of the largest crypto synthetic asset platforms with a total value locked in the protocol crossed over $600 million. It supports the minting of traditional and digital assets into synthetic forms, including stocks, commodities, indices, cryptocurrencies, inverse cryptocurrencies, etc. 

The synths minted on Synthetix can be traded on Kwenta, the decentralised exchange platform of Synthetix Network. 

How does Synthetix Network Works?

To track the price of underlying assets, Synths uses blockchain oracles like Chainlink, which are smart contract-based price discovery protocols. This allows you to benefit from the underlying asset’s price movement without requiring you to hold them. 

Synthetix protocol allows you to mint crypto synthetic assets on the Ethereum blockchain through the concept of over-collateralisation. So, to mint synths, one needs to stake SNX tokens of greater value than asset’s value on Mintr, a DApp created by Synthetix. The collateralisation ratio can go up to 700%, depending on volatility, asset type, etc.

For example, to mint synthetic rupee on the Synthetix Protocol, one needs to stake SNX tokens worth ₹7 on Mintr for every synthetic rupee worth ₹1. 

The user minting the synthetic asset always needs to maintain the collateralisation ratio on the Mintr to avoid a deficit in the system if there is a price crash. So, if the collateral value rises or there is a fall in the underlying asset’s price, the users need to mint more synths to maintain the collateralisation ratio. And if the value of collateral falls or the asset’s price rises, the user needs to provide more collateral or burn the synths proportionately. 

Any synthetic asset minted on Synthetix Protocol carries a letter s at the beginning of the symbol. For example, sUSD, sEUR, etc.

Coin Economics of SNX Token

The SNX token has multiple use cases. It can be used for staking on Mintr to mint synthetic assets, earning staking rewards, participating in the protocol’s governance. 

Users staking SNX on Mintr can earn a staking reward of 0.3% of each trade on Kwenta, the DEX of Synthentix protocol. 

SNX has an inflationary monetary policy. From March 2019 to August 2023, the total supply of SNX tokens will be increased from 100 million to 260.26 million units, with a weekly decay rate of 1.25%. Post-September 2023, it will have an annual terminal inflation rate of 2.5% for perpetuity, meaning never-ending.

Reference: https://docs.synthetix.io/litepaper/

Synthetix Network Future Growth Potential

At present, Synthetix is the largest crypto synthetic asset platform in the crypto market. But, it too faces competition from other crypto synthetic assets protocols like Mirrior.Finance, Abra, UMA, etc. 

Being the oldest player in the sector, Synthetix has the first-mover advantage. It has built an ecosystem where users don’t have to leave the Synthetix ecosystem to trade synthetic assets. For instance, users can easily exchange synths on its DEX platform, Kwenta, with zero slippages. The exchange pools liquidity model eliminates counterparty matching and provides infinite liquidity for trades.

In July 2021, Synthetix went live on Optimistic Ethereum, the layer 2 scaling platform of Ethereum, making the protocol more versatile and agile. It resulted in 50X lower gas fees for traders while improving the overall stability of the network. It is currently working on launching a fully on-chain perpetual futures platform on DeFi, and if successful, it can drive up the growth potential of SNX tokens. 

The crypto synthetic asset segment is still an evolving space with a lot of growth potential. Therefore, keep a close eye on all the developments of the sector.