Synthetix, the leading protocol for synthetic assets and derivatives trading in DeFi, has seen a remarkable price increase of over 60% in the past 30 days. What are the factors behind this impressive rally, and can SNX sustain its bullish trend?
Synthetix generates revenue from the fees charged on every synthetic asset exchange, which range from 0.1% to 1% (average 0.3%).
These fees are distributed to SNX stakers, who provide collateral for the protocol and participate in its governance. SNX stakers also receive rewards from the protocol’s inflationary monetary policy, which aims to incentivize long-term participation and alignment.
Tokenomics and Governance
SNX is the native token of the Synthetix protocol, serving three main purposes: collateralization, staking, and governance.
Holders can stake their tokens to mint synthetic assets (Synths) backed by a minimum collateralization ratio of 500%. By staking SNX, users can earn fees and rewards from the protocol and influence its direction and development through voting.
SNX has a total supply of 327.2 million tokens, of which 326.5 million are currently in circulation. The remaining tokens are allocated to the protocol’s treasury, which holds a healthy balance of $145.96 million, including stablecoins, BTC/ETH, and SNX.
The treasury funds support the protocol’s operations, development, and growth.
Synthetix operates under the governance of four key bodies: Spartan Council, Treasury Council, Ambassador Council, and Grants Council.
These councils are composed of elected members from the community who are responsible for various aspects of the protocol, such as budgeting, marketing, partnerships, and grants.
These councils’ Decisions and proposals are subject to majority votes from SNX stakers, ensuring a democratic and community-driven approach to protocol development.
Synthetix V3: A game-changer for the protocol
Synthetix is constantly evolving and improving its features and functionality, and one of the most anticipated updates is Synthetix V3, which is expected to launch in early 2024.
The upgrade is a major overhaul of the protocol’s architecture and design, which aims to achieve its original vision of being a fully permissionless and scalable derivatives platform.
Synthetix V3 will introduce several new components and enhancements, such as:
- Perps: A new type of synthetic asset that enables perpetual contracts, which are futures contracts with no expiry date. Perps will allow users to trade leveraged positions on any asset with low fees and high liquidity.
- Base: A new layer-2 scaling solution that leverages Optimism, a rollup-based Ethereum scaling technology. Base will enable fast and cheap transactions for synthetic asset exchanges, as well as seamless interoperability with other layer-2 protocols and applications.
- USDC: A new collateral option for minting Synths, in addition to SNX and ETH. USDC is a stablecoin pegged to the US dollar, which will provide more stability and flexibility for users who want to access synthetic assets without exposure to SNX or ETH volatility.
Synthetix V3 is expected to significantly boost the protocol’s performance, usability, and adoption, as well as open up new possibilities and opportunities for innovation and growth.
It will also enhance the value proposition and utility of SNX, as the token will still be required for staking, governance, and fee distribution.
SNX price analysis and outlook
SNX has been on a strong uptrend since mid-October when it broke out of a long-term downtrend that started in February.
The token rallied from a low of $2.12 on October 14 to a high of $4.13 on November 10, marking a 95% increase in less than a month. The price surge was driven by several positive factors, such as:
SNX is currently trading at $3.39 after a slight correction from its recent peak. The price is still above the 50-day and 200-day moving averages, indicating a bullish trend.
The relative strength index (RSI) is at 53, suggesting a balanced market sentiment. The MACD histogram is positive, signaling a continuation of the upward momentum.
SNX faces a strong resistance at $4, which is the previous local high and a psychological level. If SNX can break above this level, it could target the next resistance at $5, which is the 0.5 Fibonacci retracement level of the February-November downtrend.
Above this level, the next resistance lies at $6.5, which is the 0.618 Fibonacci retracement level and a historical support and resistance zone.
On the downside, SNX has strong support at $3, which is the previous local low and a round number.
If SNX falls below this level, it could test the next support at $2.5, which is the 0.382 Fibonacci retracement level of the October-November uptrend. Below this level, the next support lies at $2, the 0.236 Fibonacci retracement level, and a multi-month low.
SNX has shown remarkable strength and resilience in the past month, outperforming many of its peers in the DeFi and crypto space. Synthetix has established itself as the market leader in the Synthetics category with a solid ecosystem, innovative features, and rewarding incentives.
The upcoming launch of Synthetix V3 could be a game-changer for the protocol and its native token, as it will unlock new levels of scalability, usability, and adoption.
SNX has the potential to maintain its momentum and reach new highs in the near future as long as it can overcome the key resistance levels and sustain the bullish trend.
Disclaimer: The analysis provided is based on current market conditions and aims to provide objective insights into possible price movements. It is important to conduct further research and analysis before making any investment decisions. Coinscreed and its affiliates are not liable for any damage or loss.
