Sushi Token Plummets 45%: Examining the Factors Behind the Dramatic Drop

SushiSwap’s native token, SUSHI, a decentralized exchange, is currently down by 45% from its February 2023 peak of $1.63, its highest level in six months. This is despite the successful implementation of a proposal to redesign SUSHI’s tokenomics, making SUSHI a deflationary governance token. The proposal was made by Chief Chef Jeremy Grey in December 2022 and was voted on and agreed on by the community in early 2023. As a result, the SUSHI supply will reduce over the years, and the rewards for liquidity providers will increase.

According to the latest data from MoneyPrinter, SUSHI’s annual inflation rate stands at 1.23%, aligning with SushiSwap’s tokenomics redesign. This inflation rate is lower than Bitcoin and Cardano, which have an annual issuance rate of 1.82% and an annual emission of 1.79%, respectively. However, SUSHI’s tokenomics redesign has not been able to prevent its price from falling, with a 45% decline from its February 2023 high and a 99% drop from 2021 peaks.

The drop in price can be attributed to various factors, including the effects of the crypto winter, the hack of SushiSwap’s RouterProcessor2 contract in April 2023, and potential new regulations, particularly from the United States. The hack resulted in a $3.3 million loss for SushiSwap, and although the flaw has since been patched, the reputational damage associated with the vulnerability dents investor confidence. Further, some policymakers in the United States have taken a negative stance towards cryptocurrency, causing users in the country to hesitate to engage with DeFi protocols due to potential legal consequences.

SushiSwap’s performance is trending at 2022 lows at around $0.89, retesting a critical multi-month support level. It remains to be seen how SushiSwap will navigate potential new regulations and regain investor confidence.

J-S Tremblay
About the author - J-S Tremblay

I've been involved in the cryptocurrency world since 2016 and trading since 2019. I started Moon and Lambo in 2021. I'm passionate about crypto and love to share my knowledge. I hate bankers and I hope that cryptocurrency will change the financial world for the better. View full profile...

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