Deeply embroiled in bankruptcy suspicions! THORChain temporarily suspends savings and lending functions, native coin RUNE big dump 30%

Cross-Chain InteractionLiquidityprotocol THORChain (RUNE) recently plunged into a cloud of insolvency. The latest news indicates that in order to avoid potential liquidation risks, THORChain has currently suspended savings and lending functions, and also does not allow users of these products to withdraw BTC, Ethercoin, causing market turmoil, and the native token RUNE plummeted by more than 30% in response.

According to the official message from THORChain on Telegram, in order to address the debt issue, network node operators proposed and executed a "90-day suspension plan" earlier today (24th) to buy time for the community to develop a response plan, in order to prevent users from withdrawing funds on a large scale due to panic, leading to continued deterioration of the financial situation.

Dragonfly Capital Management Partner Haseeb Qureshi also described this action as a 'bankruptcy freeze', pointing out that THORChain is currently facing serious Liquidity pressure.

Although THORChain's loan function currently only involves BTC and Ethercoin, the supported asset range of the savings pool is wider. If there are situations where borrowers and depositors withdraw funds at the same time, coupled with the rapid deterioration of market sentiment leading to a sharp decline in the price of RUNE coin, it may trigger a chain liquidation crisis.

The operation mode of THORChain is to fulfill the borrowing and lending obligations by minting RUNE coins and injecting them into the Liquidity pool. However, this model also leads to the direct linkage of protocol stability with the market price of RUNE, forming potential systemic risks.

About a year ago, the community had already noticed this issue and took the lead in closing the new deposit function to reduce the accumulation of risk.

According to community estimates, THORChain's current potential liabilities are as high as nearly 200 million USD, with approximately 107 million USD locked in the Liquidity pool. Once the market panics, Liquidity providers and RUNE holders may withdraw massively or even sell assets, further impacting the protocol.

.@THORChain is insolvent

In the event of any large debt redemption and/or savers & synths deleveraging, it is certain that TC cannot meet its Bitcoin and Ether denominated obligations.

Validators decided to pause the network while they vote on a restructuring plan

— TCB (@1984_is_today) January 24, 2025

Despite challenges in savings and loan functionality, THORChain's core operations such as Cross-Chain Interaction Exchange Service and trading functions are still operating normally, and there have been no interruptions or other abnormal situations in transactions so far.

Deep in bankruptcy cloud! THORChain suspends savings and lending functions, native coin RUNE plummets 30%. This article was first published in Blocktempo.