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Is Thorchain about to Implode? ; here are concerning insights to its $200 million bad debt

 

By Market Steam Jan 25, 2025

 

 

Reports reveal that Thorchain has incurred approximately $200 million in bad debt, this led to a sharp crash in RUNE’s price as protocol consensus resulted in freezing assets in its lending and savers vault. 

 

The decentralized cross-chain swap protocol attributes it's acquired debt to the protocol’s design flaw, which offered “interest free and zero liquidation loans” by essentially deepening RUNE’s liquidity with each deposits. 

 

Investors and speculators are curious if RUNE’s recent price crash will continue, with many asking if this is a case similar to “LUNA” - a stablecoin protocol which was attacked for its poor design and crashed, costing investors between $40 - 60 billion. 

 

At press time, RUNE is trading above $2.7, a 24% rebound after crashing over 40% in the previous day. RUNE’s trend reversal is a ray of hope, but with $200 million in debt, and rising tension amongst investors, further investigation of Thorchain’s bad debt reveals something concerning. 

 

Betting against Bitcoin

 

Thorchain’s bad debt comes from its lending solution which allows users to Deposit BTC and ETH as collateral for USD loans with zero interest and no liquidation risks. 

 

Each collateral is pooled with RUNE, as the central asset of liquidity on the protocol. A growth in deposits increases RUNE’s liquidity depth. 

 

The protocol's entire model is built around the assumption that RUNE will appreciate in the expense of its deposited collateral, essentially betting against Bitcoin's growth outpacing RUNE. 

 

Thorchain’s long RUNE bias in its lending model has proven ineffective with $97 million in borrowing liabilities and depositors and synthetic asset liabilities amounting to over $102 million. 

 

Validators are working on a restructuring plan for the next 90 days but with RUNE’s sharp price crash, a significant decrease in TVL leading the protocol to have more liabilities than assets and the freezing of BTC and ETH withdrawals, locking depositors in, Thorchain has taken on a bad look and risks losing public confidence.