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Highlights
- ThorChain protocol is facing insolvency fears after its $199M debt crisis.
- The validators are focused on the restructuring plan, where the next 90 days could either push it to recovery or bankruptcy.
- RUNE trades at a year low, with high selling pressure, threatening a crash to $1, but the recovery could push it to $7.
ThorChain has gained the spotlight for the wrong reasons, as it has suspended its Bitcoin and Ethereum withdrawals. This happens amid its insolvency accusation, which came to light after its $199M debt crisis. The crypto community has compared it to the Terra Luna crash. More importantly, the question is whether the RUNE price is bouncing back from the decline or going into the crash. Let’s discuss.
What’s Happening With ThorChain & RUNE Token Price?
The popular DeFi protocol ThorChain is a renowned platform in the crypto industry. It equips users to exchange assets across cryptocurrency blockchains. However, it has experienced severe financial troubles, indulging in $97M in borrowing liabilities and $102M in deposit and synthetic asset liabilities.
As the DeFi protocol stands on the brink of bankruptcy, it has disabled the Bitcoin and Ethereum withdrawals since Thursday, gaining extra hate from the users. Interestingly, these liabilities arose due to design flow, which allows the swooping of Bitcoin and Ethereum for the protocol’s native tokens.
This function performed flawlessly at first but failed when the condition changed. At first, RUNE’s performance was above Bitcoin and Ethereum’s, favoring the trade. However, once the BTC and ETH outperformed the RUNE, it backfired, resulting in a significant shortfall.
Is Bankruptcy Next For ThorChain? Expert’s Take
This ThorChain news has taken the market by storm, and many analysts have presented their outlooks on the situation. The founder of Banter, Ran Neuner, has also shared his insights from his conversation with the validators. According to Neuner’s X post, the base control of the DeFi protocol is still functioning effectively, and the validators are committed to their responsibilities.
However, despite that, he claims that the protocol is technically insolvent, as it has more liabilities than assets. As a result, there are two options or outlooks, which include the protocol to face Bankruptcy. In simple terms, the associates let it collapse, leaving the stakeholders with nothing. However, in contrast, the restructuring could save the protocol and stakeholders.
Neuner has suggested turning the debt into recovery rights tokens, which would pay holders a portion of the protocol until the debt ends. Bitfinex used this pattern to manage a successful recovery after its 2016 hack. Most experts believe in restructuring, claiming that stakeholders will choose this method as it collects decent revenue.
Regardless, the decision is now up to the validators, who have 90 days to finalize the restructuring plans. Amid this, uncertainty is building about the RUNE and its price performance, especially as the token dropped to a year low.
Will RUNE Price Bounce or Crash Next?
Like the take on ThorChain recovery and bankruptcy possibility, Neuner and a few other analysts have commented on the RUNE token tanking performance. The token currently trades at a year low of $2.30 and has dropped by 40% over the week amid its protocol’s financial troubles. Considering the same, the analysts have presented the chance for a bust or boom depending on its bankruptcy and restructuring plan.
Hypothetically, the RUNE price could regain its worth with successful restructuring. However, it is a risky stage, where only careful decisions should be made.
We are neither buying nor selling the RUNE at this stage, says Ran Neuner.
On analyzing the RUNE/ USDT price chart, the bearish pressure is dominant with the formation of the death cross pattern. This pattern is the technical indicator where the 50-day SMA crosses below the 200-day SMA, highlighting the bear’s dominance. Interestingly, there is temporary relief on the support level of $2.02 and $1.78 thanks to the oversold conditions in RSI and Awesome oscillator. As a result, the selling pressure may settle with time, resulting in a recovery toward the $3.75 and $7.33 resistance levels.
However, in contrast, the RUNE price may drop to $1.78 or even to $1 with more negative news. The next 48 hours act as the defining period to reveal whether ThorChain’s RUNE bounces or crashes.
Final Thoughts
The DeFi protocol is struggling financially due to bearing heavy debt and liabilities. The next 90 days would eventually lead it to either bankruptcy or bounce back, as Bitfinex did after the hack. The concerns are still persistent around the RUNE price, which has decreased by over 40%. Crypto analysts have presented their outlooks on protocol, advising around restructuring plans due to the high revenue base.
However, the investor should carefully monitor these developments, as the bearish pressure is high on the token. The continuity of this trend of negative ThorChain news could crash the RUNE price to $1. However, once the selling pressure settles, the price may recover toward $7 or higher.
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