Once again, rounds of insolvencies have entered the crypto space, with Thorchain being the most recent. The network has paused THORFI services, probably due to its financial uncertainty, which has circulated shock waves across the markets. The functions like swaps remain active while the lending operations are on hold. Although a ‘90-day’ restrictive initiative has been enforced, financial instability amid the rising speculation of a bull run and a strong altseason raises concern.
All it started when Bitcoin borrowings increased when prices were lower, which required the minting of additional RUNE. Meanwhile, the lack of liquidity within the network added up more fire and as a result, the RUNE price underwent a massive drop of over 30%. As per the report, a pause has been imposed to prevent panic selling that could destabilize the platform.
While some believe the Thorchain network is functional, the decentralised cross-chain protocol is working perfectly fine. As it generates huge amounts of fees, the platform cannot be insolvent, and adding an additional feature, lending, did not go in favour of the platform. However, the losses are said to be minimal, which could be overcome soon. Meanwhile, some believe Thorchain is following in the footsteps of Terra (LUNA) and hence could easily go to their levels.
The platform is believed to be insolvent in a death spiral to death as the developers are alleged to have rugged their own network. Besides, the RUNE/BTC has headed back to the 2020 levels, experiencing a 96% drop from the peak in 2021, which is a major bearish flag for THORFI. As the borrowers may start repaying their loans, Thorchain has to realise losses by minting and selling RUNE.
As per some reports, only a minimum amount of BTC & ETH in the Bitcoin and Ethereum pools are left on Thorchain. Hence, the next few hours could be extremely important for the Thorchain & RUNE price as well as the entire crypto space. If the market manages to absorb the shock waves, the FUD could be squashed effectively, but if RUNE/BTC continues to drop, Thorchain is feared to be the next LUNA.
