RUNE Drops 30% Following THORChain’s Temporary Pause on BTC and ETH Withdrawals.

THORChain, the interblockchain settlements protocol, has paused bitcoin (BTC) and ether (ETH) withdrawals from its lending and savings programs to prevent potential insolvency risks.

The decision was made by network node operators, who proposed and enacted a 90-day pause early on Friday during Asian trading hours. The move aims to allow THORChain time to formulate a plan to resolve outstanding debts, as communicated in the project’s Telegram channels.

While THORChain’s lending program is focused on BTC and ETH, its saver vaults support a wider range of assets. The risk of insolvency arises if all loans and savings positions were to be closed and repaid simultaneously, combined with a significant market downturn in the price of RUNE, THORChain’s native token.

To meet its lending obligations, THORChain mints RUNE and sells it into liquidity pools. Concerns about potential insolvency led to a halt in new deposits over the past year as the community began to assess the increasing risks.

Some community members have raised alarms about liabilities reaching up to $200 million, with approximately $107 million tied up in liquidity pools. These funds could be withdrawn or sold by liquidity providers (LPs) or RUNE holders in the event of a market panic.

However, THORChain’s core service—cross-chain swaps—remains unaffected, and users can continue to perform swaps and interact with liquidity pools without disruptions.