Thorchain (RUNE), a decentralized cross-chain protocol, has found itself in a financial quagmire, triggering alarm bells across the crypto space. The network has paused its THORFI services, likely due to rising financial uncertainty. While functions like swaps remain operational, lending services have been suspended, leaving many in the community worried about the platform’s long-term viability. A 90-day restrictive measure has been imposed, but concerns over panic selling and the broader crypto market’s health continue to brew.
The turmoil began when Bitcoin borrowings increased during a period of lower prices, necessitating the minting of additional RUNE tokens. This surge in token issuance, combined with a lack of liquidity, led to a dramatic 30% drop in RUNE’s price. In a bid to prevent further destabilization, Thorchain paused certain functions to stave off a potential panic sell-off that could undermine the platform’s credibility.
While some argue that Thorchain remains functional, generating substantial fees through its decentralized services, others fear the platform may follow in the footsteps of Terra (LUNA), which collapsed due to similar financial instability. The RUNE/BTC pair has dropped drastically, back to 2020 levels, signaling significant bearish momentum. With the platform facing a critical liquidity crunch, Thorchain could soon be forced to mint and sell more RUNE to repay outstanding Bitcoin and Ethereum loans, further exacerbating its problems.
Despite these concerns, proponents believe Thorchain’s minimal losses could be recovered. However, as BTC and ETH pools on the network dwindle, Thorchain’s next few moves are crucial. If RUNE’s price continues its downward spiral, Thorchain may face a collapse akin to LUNA, potentially shaking the entire cryptocurrency market.
With heightened speculation of a bull run and strong altseason, the unfolding events around Thorchain could determine the next major shift in the crypto landscape. Time will tell whether this storm passes or marks the beginning of a much deeper crisis for the platform.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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