There is nothing delicious about SUSHI anymore.
The SushiSwap decentralized exchange’s governance token continued on its downtrend as its price fell another 15 percent in the new week. As of 1130 UTC, SUSHI/USD was trading at $0.75, down 94 percent from its record high at $12.48, a level achieved on September 1, 2020.
The SushiSwap liquidity pool also suffered a major blow.
The total valued locked (TVL) inside it plunged from $1.428 billion on September 12 to circa $289 million as of today. That marked withdrawals of almost $1.13 billion in just 24 days, according to data fetched by DeFi Pulse. It further showed investors’ receding confidence in SushiSwap, a project that had promised to outrank its top competitor UniSwap.
A higher TVL represents trust in the automated market maker industry. It ensures that more people are willing to support the exchange by depositing their capital into its reserves. In return, they anticipate strong incentives, a steady revenue from a portion of the transaction fees, as well as governance rights by holding the native token.
Nevertheless, if the trust disappears, so does the money. People start withdrawing their capital from the pool thereby reducing the exchange’s capability of processing trades faster in absence of adequate liquidity. In turn, revenue, as well as the appeal of the governance token, falls hand-in-hand.
SushSwap has faced severe trust issues with its liquidity providers ever since its founder Chef Nomi drained the protocol’s development fund off 38,000 ETH on September 7. The media termed it as an “exit scam,” even after FTX Exchange’s head Sam Bankman-Fried took control over SushiSwap.
Mr. Nomi later returned the capital back to the SushiSwap treasury but that has not been enough to earn the people’s trust all over again.
Need to make some regulations for these dumpers, or
Is it the @binance? Anything after listing on binance starts dumping!
— Calm Trader | Student of Markets (@Trader_Calm) October 5, 2020
That is very reflective of the SUSHI market.
What’s Next for SUSHI?
In the absence of concrete bullish fundamentals, SUSHI risks getting exposed to the volatile market trends driven by technical traders.
For instance, the SushSwap token’s latest plunge coincides with the rest of the decentralized finance market. Almost every DeFi cryptocurrency that posted exponential gains in the third quarter is now down on its knees. It is because traders are either profit-taking or moving their capital into projects with long-term sustainability.
SUSHI expects to tail the broader market trend. With no credible history of price actions, the token is now undergoing a free fall. Watching its liquidity pool, meanwhile, could throw a few hints at its next market move.