THORChain Suspends Bitcoin (BTC) and Ethereum (ETH) Withdrawals to Prevent Insolvency Risk

The THORChain protocol has suspended Bitcoin (BTC) and Ethereum (ETH) withdrawals from its lending and savings programs (Lending e Savers).

Inter-blockchain protocol THORChain has halted Bitcoin (BTC) and Ethereum (ETH) withdrawals in a bid to stave off potential insolvency, as the native crypto RUNE slumps by 30% over the last 24 hours.

THORChain suspends BTC, ETH withdrawals over insolvency risk

THORChain protocol has halted Bitcoin (BTC) and Ethereum (ETH) withdrawals from its Lending and Savers programs to prevent potential insolvency.

The decision was made by the operators of the THORChain network nodes, who proposed and implemented the pause in withdrawals for a period of 90 days to allow time for a solution to be found.

Actually, the deposits were disabled a year ago as the community grew increasingly concerned about the risk.

Describing the THORChain situation on X is also crypto entrepreneur Erik Voorhees, founder of crypto exchange ShapeShift and CEO of Venice.ai.

Voorhees explained that the remaining debt and the collateral positions of Lending and Savers are now frozen and the community must figure out how to handle them, adding that since THORChain is one of the most profitable protocols in the ecosystem, it’s very likely that there are more paths to take to avoid falling into insolvency.

Moreover, the crypto entrepreneur stated that the Lending and Savers project were two experimental additions to THORChain, which means that these additional projects failed, as they were too risky for the protocol.

According to Voorhees, THORChain did well with its basic DEX protocol but failed to advance the discipline in Lending and Savers.

THORChain suspends BTC, ETH withdrawals: RUNE crashes 30% in 24 hours

Currently, the Lending program of THORChain includes only BTC and ETH, while its savings vaults (Savers) support more assets.

In practice, a situation of insolvency could occur if all loans and the positions of savers were closed and repaid at exactly the same time.

Moreover, another cause of insolvency could also derive from the drop in RUNE, since THORChain meets its loan obligations by minting RUNE and selling it in the liquidity pools.

In any case, over the last 24 hours, RUNE recorded a price dump of 30%. At the time of writing, RUNE is trading at $2.25, down from $3.05 yesterday.

This RUNE price dump becomes -40% over the last week and -57% over the last month.

Landing on Ledger and modest success in DeFi

Last October 2024, THORChain landed on the popular crypto hardware wallet Ledger, enabling its users to perform native swaps between BTC and ETH directly on the Ledger Live app without having to resort to wrapped tokens or other centralized services.

Launched in 2021, THORChain quickly became a valid answer to the growing demand for new sources of interoperability in the field of cross-chain.

Moreover, even in the world of decentralized finance (DeFi), THORChain has demonstrated a modest success, with a TVL on the protocol of over $266 million, according to data from DeFiLlama.