RUNE Craters 30% as THORChain Implements Withdrawal Pause for BTC and ETH.

THORChain Freezes BTC, ETH Withdrawals to Address Potential Insolvency Risks

Interblockchain settlements protocol THORChain has temporarily suspended withdrawals of bitcoin (BTC) and ether (ETH) from its lending and savers programs in response to concerns over potential insolvency risks.

The suspension, proposed and implemented by network node operators, entails a 90-day pause announced during early Friday trading hours in Asia, according to updates from THORChain’s Telegram channels. This pause aims to give the community and developers time to address debt-related challenges and reduce systemic risks.

THORChain’s lending program exclusively supports BTC and ETH, while its saver vaults include a broader range of assets. Concerns stem from a scenario where all loans and saver positions could be simultaneously closed, potentially triggering a liquidity crisis if accompanied by a sharp drop in RUNE, the platform’s native token.

The protocol funds its debt obligations by minting and selling RUNE into liquidity pools. However, the community had already voiced concerns about liabilities last year, leading to the suspension of new deposits into the lending program.

Some members estimate total liabilities at around $200 million, with $107 million locked in liquidity pools. A mass sell-off or withdrawal by liquidity providers (LPs) or RUNE holders could escalate the financial strain on the protocol.

Despite the withdrawal freeze, THORChain’s core functionality of cross-chain swaps remains fully operational. Users can still engage in swaps and utilize liquidity pools without interruptions, ensuring the protocol’s primary services continue unaffected.