The native token of THORChain, RUNE, is in freefall, with its price crashing down by 82% since a December 10, 2024, snapshot. A confluence of structural problems, dwindling protocol reserves, and escalating market doubt is exerting unprecedented downside pressure on the token, and this is probably one of the steepest declines we’ve seen in quite a while. The ongoing sell-off of RUNE can be traced to a few critical causes, including: – a rush of network nodes exiting, – a depletion of liquidity, – some key leadership figures leaving or being asked to leave, and – an apparent failure to resolve debt from the ThorFi lending program. With the protocol now having come to a moment of crisis, the next 24 hours could determine whether it can recover or will continue to spiral downward. Network Stress and Liquidity Challenges Weigh on RUNE’s Price RUNE’s decline is primarily due to the exit of 26 nodes—roughly 20% of the total network. Concerns have arisen that the node exits could soon lead to around 20 million RUNE being sold into the market. Node exits almost always lead to downward price pressure as the exiting holders sell their tokens. And in this case, the nodes RUNE is losing are significant holders. $RUNE #RUNE #thorchain **RUNE is insolvent.** They owe over $200 million, and their total market capitalization, currently at $1.4, stands at $450 million. This means that to repay their debt, they would need to sell 50% of the total supply at the current price, which is… pic.twitter.com/x1yNWbFhfX — Crypto Nikko (@cryptonikkoid) February 1, 2025 Compounding this instability, TORChain’s trading assets have plummeted, with reserves falling from 50 BTC to a mere 10 BTC. This drop in liquidity leaves the protocol a sitting duck for maintaining price stability. And what’s worse, a liquidity pool half full of RUNE makes the market more susceptible to price swings that move the value of RUNE up and down a lot. Concurrently, the differences between RUNE’s pricing on centralized exchanges (CEXs) and THORChain itself show tension within the system. A CEX price that significantly exceeds the THORChain price indicates that arbitrage trading is inefficient. The system looks less like a continuous sum of money and more like two distantly connected halves, which is exactly what makes things so stressful for investors who are confident that both halves should be “connected,” so to speak. Community Shake-Up and Growing Debt Concerns When a key community leader for THORChain, known as @1984_is_today, announced that they had divested their RUNE holdings and exited the project, investor sentiment took yet another blow. This individual had been a well-known and well-loved figure advocating for the growth and development of THORChain, and their departure sent surprise and dismay throughout the community. Amid this panic, retail investors fled, and a sell-off accelerated. The crisis is compounded by the unresolved debt from THORChain’s ThorFi lending program, which stands at over $200 million. Considering that the total market capitalization of THORChain is around $450 million, repaying this debt would require liquidating nearly half of RUNE’s total supply at current prices—a scenario that is almost certain to have disastrous consequences for the price of RUNE and, correspondingly, the overall health of THORChain. Why is $RUNE dumping? ➔ 26 nodes (~20%) are leaving, which could dump ~20M #RUNE into the market soon. ➔ The protocol's trade assets dropped (50 BTC → 10 BTC), making it harder to keep prices stable. ➔ A key community leader ( @1984_is_today ) sold his RUNE and quit, causing… pic.twitter.com/jCTNa1AE2w — Master of Crypto (@MasterCryptoHq) February 1, 2025 The debt burden threat is hanging over THORChain. In already fragile market conditions, this obviously creates more concern about the project’s future and its ability to recover. Will it be able to recover without the kinds of drastic interventions that tended to mar the DeFi space for much of 2022? Validator Revenue Cuts Spark Backlash A recently suggested alteration to THORChain’s economic structure has further intensified disputes. The suggestion seeks to lower validator earnings by a significant amount, and it has been met with strong reaction from network participants. Even though many validators are already dealing with the tragicomic financial situation caused by RUNE’s price collapse, this proposal could impact even more validators should it move to implementation. To implement it would, in effect, go against a few of the core principles the network was originally founded upon. Such drastic measures, critics contend, should have been foreseen and dealt with long before they became necessary. Instead, the Rook’s problems and the THORChain crisis have been met with a series of insufficient or untimely fixes, leading to a state of affairs that has many investors feeling anything but recharged about their faith in the long-term viability of THORChain. Can THORChain Survive This Crisis? As RUNE’s price falls ever further, the direct worry is what will happen to THORChain during this time of heightened uncertainty. Should any more nodes decide to leave the network, or if the already low liquidity should get any lower, then the pressure to sell could ramp up significantly, and RUNE’s price could easily dip under $1. Nonetheless, THORChain maintains a dedicated community and a strong history of bouncing back. If the protocol can take necessary prompt actions to right the ship—like reworking its debts, beefing up incentives to achieve the quorum of nodes needed for seamless operation, and reestablishing a minimum level of liquidity—the project might then have a fighting chance. The upcoming days will be critical. How well the THORChain can stabilize its network and reassure investors will determine whether RUNE can make a comeback or if the sell-off will continue to deepen. Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services. Follow us on Twitter @nulltxnews to stay updated with the latest Crypto, NFT, AI, Cybersecurity, Distributed Computing, and Metaverse news ! Image Source: sakchai / 123RF // Image Effects by Colorcinch
