THORChain Suspends Withdrawals Due to $200 Million Insolvency Issues
THORChain has halted withdrawals from its Lending and Savers products. The underlying chain and THORSwap remain operational.
Key points:
- Co-founder JP Thor paused deposits into the Savers and Lending program for 6-12 months, a decision reversed by validators.
- THORChain faces approximately $200 million in BTC and ETH liabilities it cannot cover without impacting RUNE's price.
- RUNE is central to THORChain's lending mechanism, which requires RUNE to be minted when loans are repaid, potentially creating inflationary pressure if RUNE underperforms against BTC and ETH.
- The Savers product also relies on RUNE, exposing users to similar risks.
- RUNE's supply minting has exceeded burning rates, contributing to downward price pressure.
- THORSwap continues with significant trading volumes, generating around $700k in fees weekly.
- RUNE's price has dropped 44% this week, complicating repayment of loans and withdrawals.
- JP Thor suggested using protocol revenue to address lender compensation over the next 2-3 months.
- Concerns raised about the dependency on RUNE's performance echo past issues seen in the Terra/Luna collapse.
For further analysis, see Blockworks Research's report on THORChain's insolvency dynamics.