RUNE Plummets as THORChain Pauses THORFi Services Amid Financial Restructuring

THORChain, a decentralized liquidity protocol, has temporarily suspended its THORFi operations in response to insolvency concerns over approximately $200 million in liabilities.

The suspension, announced on Jan. 23, impacts the Savers and Lending programs and is part of a 90-day restructuring plan aimed at tackling financial challenges caused by the products.

According to a prominent crypto-focused X account called TCB, THORChain's insolvency stems from $97 million in lending obligations and approximately $102 million tied to savers and synthetic assets.

Reports of THORChain's debt have triggered a sharp decline in its native token, RUNE, which has dropped 30% in the last 24 hours and 46.4% over the past week, according to CoinGecko. Currently, RUNE is trading at $2.10.

This development marks a critical juncture for THORChain as it confronts financial instability and seeks to realign its operations for long-term survival. The restructuring also underscores broader challenges faced by decentralized finance platforms, which must navigate market volatility, user confidence, and complex financial systems.

A developer at THORChain explained that the decision to temporarily pause THORFi stems from wanting to protect liquidity providers (LPs) and maintain network stability. The developer added that swaps would continue operating normally.

‘Bankruptcy Freeze’

TCB identified THORFi’s risky lending and leverage features as the primary cause of instability. As a result, these features have been halted to address the financial challenges and enhance platform stability.

“I have been warning about the danger of hidden leverage since I joined this community,” TCB’s post reads. “THORchain has gotten so complicated that only a handful of people fully understand how the leveraged feature and liquidity work with each other and affect the underlying assets.”

Meanwhile, the pause is aimed at preventing a "rush to the exit," which could destabilize the platform further, Haseeb Qureshi, managing partner at Dragonfly, said in a post on X. He also compared the situation to a “bankruptcy freeze.”

THORChain and ThorFi

THORChain allows users to conduct cross-chain swaps of native assets without centralized intermediaries, enabling the trading of assets like Bitcoin (BTC) and Ether (ETH). This is made possible through decentralized liquidity pools, where users can deposit their crypto assets and earn transaction fees in return.

Meanwhile, ThorFi serves as THORChain’s experimental DeFi layer, offering features such as lending and savings programs for users to earn a yield on their assets.