SNX, the native token that powers the Synthetix Decentralized Finance protocol, has surged in value in what is a defiance of the current market trend, as Bitcoin and other cryptocurrencies have sold off to trade at levels not seen since November 2020.
In the last seven days, data from CoinMarketCap reveals that the SNX token is up over 100%. Despite Bitcoin falling below $21,000, a price point it recently reclaimed earlier in the week. The cryptocurrency market capitalization is still trading below the $1 trillion mark.
Before we look further into why the token is rallying, let’s look at what the Synthetix is all about.
What is Synthetix?
Synthetix is a decentralized finance (DeFi) protocol that provides on-chain exposure to a wide variety of crypto and non-crypto assets. The protocol is based on the Ethereum (ETH) blockchain and offers users access to highly liquid synthetic assets (synths). The platform aims to broaden the cryptocurrency space by introducing non-blockchain assets, providing access to a more robust financial market.
Synthetix operates in the DeFi space as a decentralized exchange (DEX) and a platform for synthetic assets. The protocol is designed in a way that exposes users to the underlying assets via synths, without having to hold the underlying asset. The platform allows users to autonomously trade and exchange synths.
Alongside a host of the leading cryptocurrencies, Synthetix also supports synthetic gold and Tesla stocks.
The platform tracks the underlying assets using smart contract price delivery protocols called oracles. This way, Synthetix allows users to trade synths seamlessly, without liquidity/slippage issues. It also eliminates the need for third-party facilitators.
The SNX tokens are used as collateral for the synthetic assets that are minted. This means that whenever synths are issued, SNX tokens are locked up in a smart contract.
Why the surge in price?
SNX is the top gainer of the top 100 cryptocurrencies by market capitalization in the last seven days. A major reason for the rally is as a result of strong volumes on the Synthetix platform.
It also cited increased volumes from options platforms such as Polynomial and Lyra Finance, as well as Optimism futures growth. This increased activity and volumes resulted in higher demand for SNX, thus contributing to its strong uptrend.
Another factor to consider is the Synthetix’s active addresses metric. The metric reveals a strong increase in activity on the platform. Active addresses grew from 327 on 17 June to 1074 by 20 June. This is the highest number of active daily addresses that it recorded in the last 30 days. The network growth metric consequently recorded an increase from 60 to 133 during the three-day period.
Finally, on-chain metrics revealed the intentions of shorting the SNX token across numerous exchanges. Celsius network is offering a 300% Annual Percentage Rate (APR) to users for shorting their SNX holdings.
What you should know
SNX currently has a market capitalization of $391 million.
The platform has seen its trading volume surge the last 24 hours compared to its usual average and seen its volume to market capitalization ratio currently stand at 1.02. This shows that investors are piling in money to buy the token as the token has gone on bid despite the dismal performance last week.
-Nairametrics.