THORChain Suspends Bitcoin and Ethereum Withdrawals Due to $199 Million Liability
THORChain has taken the decision to suspend Bitcoin and Ethereum withdrawals within its lending and savings programs following the emergence of reports indicating a $199 million liability.
Temporary Pause in Validator Node Activities
Founder John-Paul Thorbjornsen disclosed on Jan. 24 that validator node activities for THORFi services have been temporarily paused. This suspension has led to a halt in debt repayments and synthetic asset redemptions as validators deliberate on a restructuring plan.
Despite these disruptions, trading and swapping functions on the platform remain operational.
Identifying the Problem
A prominent investor and protocol node runner, TCB, revealed on Jan. 24 that THORChain’s debts amount to $97 million in loans and $102 million in savers and synthetic assets. The protocol currently holds $107 million in liquidity that providers can withdraw at any time, creating an imbalance that poses a significant risk to the platform’s stability.
To address this situation, TCB highlighted two possible scenarios: a rapid withdrawal by a small percentage of creditors leading to a collapse, or a pause in operations to restructure debts for long-term viability.
Expert Insights
ShapeShift’s CEO Erik Voorhees explained that the lending and savings programs were experimental features that introduced significant risks. He emphasized the need for a sustainable solution to address the platform’s vulnerabilities.
Proof of Steve also supported the suspension, stating that excessive reliance on the protocol’s native token, RUNE, made THORChain vulnerable to external threats. The community now has the opportunity to devise a more sustainable approach.
ThorChain’s Financial Outlook
Thorbjornsen reassured users that the platform generates sufficient revenue to address its liabilities post-restructuring. However, he cautioned that the price of RUNE may experience further declines during this period.
Proof of Steve shared an update indicating that the protocol’s revenue has remained stable, with an increase in unique daily depositors. TCB highlighted that THORChain generated over $30 million in fees last year and is poised for higher revenue in the current year.
THORChain TVL and RUNE Decline
Following the announcement, the price of RUNE dropped by nearly 30%, reaching a two-year low of $1.9 before recovering slightly to $2.4. TCB attributed this decline to speculative short selling and reassured the community that features fueling the downward trend have been disabled.
Additionally, the total value locked (TVL) on THORChain has decreased by over $100 million since Jan. 7, currently standing at $297 million according to DeFiLlama data.