RUNE falls 30% as THORChain suspends THORFi services

THORChain (CRYPTO:RUNE) has temporarily halted its THORFi (CRYPTO:THOR) services amid financial uncertainties, leading to a significant drop in the value of its native token, RUNE.

The decision comes as part of a 90-day restructuring plan aimed at addressing issues related to the platform's "Savers and Lending" programs, which have reportedly accumulated unmanageable debt.

While trading functions such as swaps remain operational, lending activities are currently suspended.

This pause is intended to prevent a potential mass withdrawal that could destabilise the platform further.

Haseeb Qureshi from Dragonfly described the situation as akin to a "bankruptcy freeze," highlighting a severe liquidity crisis within the protocol.

Concerns have been raised regarding THORChain's ability to meet its obligations to creditors, especially if there are widespread redemptions.

These worries stem from an apparent shortage of bitcoin reserves in THORFi lending pools, which has emerged due to significant bitcoin borrowings made when prices were lower.

The need to mint additional RUNE to cover these obligations has compounded the issue.

Without sufficient liquidations within the protocol, there is a risk of a substantial decline in RUNE's value, reminiscent of the Terra/Luna collapse in 2022.

The community is actively discussing proposals for an economic redesign to stabilise the network.

"The protocol makes a ton of money and can service the debt — once restructured," stated John-Paul Thorbjornsen, the founder of Thorchain, expressed optimism about the future.

However, past protocol hacks have raised additional concerns about its security and reliability.

At the time of reporting, the THORChain (RUNE) price was $2.11.