THORChain Under Fire as Bitcoin, Ether Withdrawals Suspended—Faces Insolvency Accusations

• A near-$200 million debt crisis is potentially placing THORChain at risk of bankruptcy.
• Nodes are voting on making key changes to the network. THORChain is yet to make an announcement.
• Following the news, the network’s native RUNE token dropped 30% to $2, its lowest price since late 2023.

THORChain (RUNE) has put a 90-day pause on Bitcoin (BTC) and Ethereum (ETH) withdrawals as the network scrambles to restructure and avoid insolvency due to a $199 million debt.

THORChain on Pause

The THORChain network is in hot water as the platform has accrued a gigantic debt and leverage in its ecosystem, forcing the network to remove certain features and restructure to avoid further disaster.

Some community members and sources , including long-term investor TCB, have alleged that the network carries roughly $199 million in liabilities.

Of that, it has $97 million in borrowing liabilities and $102 million in synthetic asset and depositor liabilities.

As TCB notes, ThorFi’s risky lending and leverage features, which are considered the leading cause behind these troubles, have also been pulled from the network.

Restructuring Plan

TCB also offers several steps the network needs to take to survive and thrive afterward.

These include but aren’t limited to, permanently freezing all lending and savers positions, tokenizing lending and savers claims, and burning all Protocol Owned Liquidity (POL) keys to prevent centralization risks.

Furthermore, a proposal to increase outbound transaction bandwidth has been put forward to THORChain’s 116 active node operators.

In order to pass, it’ll need 78 votes. At the time of writing, the “MaxTxOutOffset” and MinTxOutVolumeThreshold” have 54 votes, and the TxOutDelayRate proposal has 53.

For now, cross-chain functionality remains intact, but the uncertainty has prompted a sharp decline in the value of the platform’s native token, RUNE, which shed over 30% in value following the news and almost fell under $2, its lowest price since 2023.

It has since recovered some 10% or so at the time of writing.