Maple Finance Faces Liquidity Crunch From Babel Contagion
Crypto lender Maple Finance is also facing liquidity issues amid the ongoing liquidity crisis in the crypto market. Maple Finance on Wednesday revealed that Babel Finance has a loan of $10 million in the Orthogonal Trading liquidity pool on Maple.
In fact, Maple Finance has warned that the lending protocol may face liquidity issues in its pools due to more withdrawal requests. Lenders may not be able to withdraw funds and must wait for borrowers to repay the loan.
Meanwhile, Maple’s MPL token price has fallen nearly 50% in June, with the current price trading at $15.81.
Maple Finance’s Exposure to Celsius, Babel and 3AC
Maple Finance on June 22 said Orthogonal Trading, a delegate with liquidity pool on Maple, has offered a $10 million loan in USDC to Babel Finance from its liquidity pool on Maple. Moreover, Orthogonal has been in touch with Babel management since Babel stopped withdrawals due to liquidity pressure. Also, the team has promised to focus on protecting the interests of lenders.
Liquidity pools on Maple are facing a cash crunch due to liquidity pressure. The current lending balance in several pools is zero. Lenders generally deposit into a pool to earn interest in the pool’s liquidity asset. This interest is determined by the terms set by the pool delegate and borrowers. In return, lenders earn MPL rewards.
In response to lack of insufficient cash, Maple Finance stated:
“As loans mature over the coming weeks, borrowers’ repayments will increase the available capital in the pools that can then be withdrawn by lenders. Lenders will continue to earn interest and MPL token rewards during this time.”
Also, Maple has announced that it does not have any direct exposure to Celsius and Three Arrows Capital. However, borrowers on Maple have confirmed minimal exposure to 3AC and Celsius. Moreover, Maple will be in communication with its borrowers and gather updated financial statements.
Maple Finance’s Founder Sid Powell Defends the Platform
Maple Finance’s founder Sid Powell in a tweet on June 22 said the platform has a more antifragile system as compared to CeFi. He asserts a default in one pool does not impact lenders in another pool.
“There can be a delay on withdrawing while waiting for loan repayments, but withdrawals can’t be frozen unilaterally, making it more predictable and we’re working on reducing delays with better mechanism design.”
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