Recent observations made by the digital currency account X have revealed that THORChain’s lending platform is facing a concerning shortage of bitcoin to repay its creditors. At the time of assessment, there were 1,604 bitcoin to be repaid, while the lending pool only contained 592 bitcoin.
We need to raise awareness about the dire state of Thorchain’s lending service, which poses a significant risk to the network itself. Closing loans at current rates would require minting 24 million RUNE tokens against 1,604 BTC collateral. pic.twitter.com/OykZbMQCdx
— atebites (@ate_bites) January 8, 2025
According to insights shared by Lava founder Shehzan Maredia, THORChain converts the bitcoin collateral into its native token, RUNE, which is used to facilitate loan transactions. While this mechanism may seem straightforward, the operational intricacies are elaborated on the THORChain website.
The critical issue arises from the fact that a significant portion of borrowed funds when bitcoin prices were lower now requires a substantial amount of RUNE tokens to settle debts. This could potentially impact the value of RUNE and hinder THORChain’s ability to repurchase bitcoin for creditors.
If investors begin shorting RUNE, the situation could escalate into a problematic cycle similar to the Terra/Luna crisis of 2022. With uncertainties looming, it is advisable for depositors to consider reclaiming their bitcoin collateral from THORChain’s lending service as a precautionary measure.
This article represents a personal perspective. Views expressed are solely those of the author and do not necessarily align with BTC Inc or Bitcoin Magazine.
