Next one! Hodlnaut platform is close to collapse
By Alex Panasenko 1809 15 Aug 2022
The list of cryptocurrency lending protocols that may cease operations is expanding: Singapore-based lending platform Hodlnaut notified users about the suspension of depositing and withdrawing funds, referring to “market conditions”.
The company added the standard notation for such cases, saying that work on a recovery plan was underway (well, they couldn’t write, “There’s just no money, but you hang in there, and have a good day”, could they?). The date of the next communication was announced as August 19, although everyone understands that such an 11-day pause looks like a banal and desperate attempt to win at least some time.
The whole situation is like two peas in a pod, resembling the same sad scenario that has been playing out in the CeFi sector in the last few months: everything works in a bull market, but it stops working in a bear market. There is a liquidity crisis when the execution of liabilities towards borrowers first becomes impossible, and then everything gets a “snowball effect”, making an already unsolvable problem even worse. So, one of the effective practices for preventing such an “avalanche” is to stop all operations.
“But wait a minute!” you will say, “Why is the disaster happening right now when bitcoin has surged from $18,000 to $24,000?” And you would be right: things should have gotten better in the last few weeks and months, not worse. And the reference to a bear market, in this case, looks unconvincing.
The shocking truth is that the Hodlnaut managers are unlucky gamblers. The famous blockchain whistleblower FatMan, known for his investigations into the Terra/Luna bankruptcy, provided convincing facts that Hodlnaut users’ funds were used first to stake money in the bankrupt Anchor platform and then to try to cover losses by opening short margin positions in the expectation of further market declines. That explains the fact that the problem worsened despite the recovery of quotations.
In the published FAQ, the platform informs that it will continue to accrue interest to users with active deposits. But what good does that do if withdrawals are blocked? Hodlnaut might as well have doubled the reward rate during the investigation. But of course, this would look like outright mockery.
Also, users would be able to continue to rub salt in their wounds by logging into their personal accounts and viewing their balance and transaction history. Probably, this will allow the users to get used to the fact that these figures on the screen are no longer their real assets.
There are all the signs of a scam: a section devoted to the project’s team disappeared from the official website, while social networks are actively cleansing and removing pages from the site. A company that is actually engaged in solving the problem would definitely have more productive activities.
Alas, we have another sad story, which will surely become (won’t it?) a lesson for both founders and investors.