Synthetix Surges 70% as Trading Volumes Explode

The decentralized synthetic asset platform Synthetix led a relief rally in the cryptocurrency market today, surging around 100% from $1.57 to $3.16 before correcting to $2.88.

Synthetix Surges on Market Bounce

One of the earliest DeFi protocols looks like it’s making a comeback.

Synthetix, a decentralized platform for minting and trading synthetic assets has led a relief rally in the cryptocurrency market today. Its utility and governance token SNX jumped by around 70% on the bounce, significantly outpacing the total crypto market, which has rebounded by around 9% on the day. Aave and MakerDAO, two other DeFi projects often described as “blue chips” alongside Synthetix, also posted double-digit gains as the market showed signs of life for the first time in weeks. 

Synthetix was one of the first DeFi projects to launch on Ethereum, offering users a way to trade tokenized financial instruments that track the price of other assets such as stocks and gold. Alongside a host of the leading cryptocurrencies, Synthetix also supports synthetic gold and Tesla stocks.

While synthetic assets are the protocol’s bread and butter, the recent price action seems to be influenced by newer fundamentals strengthening the project, specifically the success Synthetix has seen with a new atomic swap function introduced with the SIP-120 proposal. By integrating with the largest decentralized exchange for like-priced assets, Curve Finance, and the decentralized exchange aggregator 1inch, the feature helps users execute large-scale trades between different asset classes with minimal slippage. While it’s been in effect since early November 2021, Synthetix upgraded atomic swaps with SIP-198 in May to significantly improve the user experience. This allowed users to execute large swaps between, for example, wBTC and ETH on 1inch in a single transaction by taking advantage of Synthetix’s zero-slippage trades and Curve’s deep liquidity and low fees.

Since Synthetix implemented the upgrade, atomic swaps have seen increasing adoption, accounting for most of its volume on Curve, 1inch, fixed forex, and other aggregators and integrators. As a result, the protocol’s trading volumes have surged over the last week, consistently averaging above $100 million in daily trading volume and reaching an all-time high on Sunday, with the daily volume topping $396 million. 

Synthetix trading volume per day (Source: Dune.com)

Per data from cryptofees.info, the surge in trading volume has also propelled Synthetix to third rank among protocols consuming the most trading fees, topping the likes of Aave, BNB Chain, and Bitcoin for the day on Sunday.

A spike in trading fees also means a surge in revenues or profits accrued to SNX stakers, which has propelled the staking yield for the token to 60.2% APY, with 12.4% of that coming from trading fees alone. According to data from Token Terminal, Synthetix’s price-to-earnings ratio, calculated by dividing the SNX’s fully diluted market capitalization by the protocol’s annualized revenue, is currently around 7.7x after falling 74.7% over the last week. A lower price-to-earnings ratio can indicate that an asset is undervalued, earning more in revenues on a per-token basis.

The improving fundamentals seem to have been noticed by value investors in the DeFi space, though Synthetix has some way to go to return to its peak. SNX is currently trading for around $2.86, down around 90% from the all-time high price of $28.50 recorded in February 2021. 

Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.

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