Solend, a lending protocol on Solana, has accrued a bad debt of more than $6 million from a large underwater position.
After a sharp fall in the price of solana (SOL) — down about 50% in the last three days — the collateral deposited in the loan fell below the borrowed sum, pushing the position underwater.
Currently, the user that made the loan owes $8 million in USDC but only holds $2 million in SOL collateral on the platform, as a result of rapid dwindling SOL prices. This indicates a bad debt of over $6 million, Solend founder Rooter told The Block.
"The bad debt in the main pool will be covered by the treasury. Right now it's hovering around $6 million which the treasury covers," Rooter said.
The treasury address holds worth about $33 million in total assets, data from explorer SolanaFM show.
Under normal conditions, the loan would have been liquidated by other market participants. But liquations happened slower and in smaller chunks due to oracle issues and network congestion on Solana, according to Solend founder Rooter.
"The loan could not be fully liquidated in time due to oracle issues, which were caused by a combination of network congestion and chaotic prices on different exchanges,” Rooter explained.
The loan value was around 40 million USDC until yesterday morning. Later it shrunk as the platform kept selling the collateral to recover the debt.
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