Despite the overall stability in the crypto sector and positive monthly price performance for nearly all of the crypto projects, Singapore-based crypto lending platform Hodlnaut decided to put a ban on withdrawals, token swaps, and deposits in order to focus on stabilizing their liquidity and preserving assets.
The liquidity concerns come in a fairly stable start of August, but it seems the crypto havoc of the second quarter of 2022 forced many exchanges into shutting down operations.
Is it just liquidity issues for Hodlnaut?
According to the official Hodlnaut announcement, the platform also withdrew its licensed application with the Monetary Authority of Singapore (MAS), which resulted in Hodlnaut also stopping its regulated digital payment token (DPT) services, or token swaps. Such a move, according to experts, is a sign of Hodlnaut declaring bankruptcy rather than tracking a solution for the liquidity crisis.
However, Hodlnaul stated that the company already plans to make a recovery plan.
“We are actively working on the recovery plan that we hope to provide updates and details on as soon as permissible. We are consulting with Damodara Ong LLC on the feasibility and timelines of our intended execution plan and are strategizing our recovery plan with our users’ best interests in mind.” Hodlnaut stated in its official announcement.
Hodlnaut’s actions speak of the opposite, especially by restructuring its social media presence solely to email, Twitter, and Telegram communication in order to “consolidate [its] efforts and give accurate information promptly.”
The Terra-Hodlnaut connection
It seems that the TerraUSD (UST) market crash was more than just de-pegging, but rather a market-wide event, taking its toll on smaller crypto platforms. The connection between Terra and UST was first announced by FatManTerra, who also first announced the UST market crash in June 2022.
“On the 6th of April, Hodlnaut added UST to their stablecoin repertoire, boasting some great interest rates. 14% on a CeFi platform is very high for a stablecoin, even higher than what 3AC was offering lending platforms without even factoring in the site’s disbursement vig,” FatManTerra added.
“The truth is, many of these CeFi platforms are far more irresponsible & degenerate than you can imagine, and the public needs to know the *real* risks behind all the magical 8% stablecoin APYs. It's self-custody season. The tide is receding. Don't be the one caught next.” the researcher concluded.
Is Hodlnaut really going bankrupt?
According to FatManTerra, several big TerraUST transactions occurred months before Hodlnaut listed UST. However, “before they ever listed UST, they were moving millions upon millions of dollars into Anchor (and were also paying better rates than competitors).”
So, after the UST de-peg, Hodlnaut faced immense liquidity issues, which, it turns out, the platform was not capable of overcoming.
Hodlnaut joins other major cryptocurrency lenders like Voyager Digital, Celsius, and Blockchain.com, which already ceased their operations.