Maple Finance Faces Liquidity Crunch From Babel Contagion

Crypto lender Maple Finance is also facing liquidity issues amid the current liquidity crunch in the crypto market. Maple Finance revealed on Wednesday that Babel Finance has a loan of $10 million in the Orthogonal Trading liquidity pool on Maple.

In fact, Maple Finance has warned that the lending protocol may experience liquidity issues in its pools due to more withdrawal requests. Lenders may not be able to withdraw funds and must wait for borrowers to repay the loan.

Meanwhile, the price of Maple’s MPL token fell nearly 50% in June, with the current price trading at $15.81.

Maple Finance exposure to Celsius, Babel and 3AC

Maple Finance on June 22 said Orthogonal Trading, a delegate with a liquidity pool on Maple, offered a $10 million loan in USDC to Babel Finance from its liquidity pool on Maple. Additionally, Orthogonal has been in contact with Babel management since Babel halted withdrawals due to liquidity pressure. Additionally, the team promised to focus on protecting the interests of lenders.

Liquidity pools on Maple are facing a liquidity crunch due to liquidity pressure. The current loan balance in multiple pools is zero. Lenders typically deposit into a pool to earn interest on the pool’s cash. This interest is determined by the conditions set by the pool delegate and the borrowers. In return, lenders earn MPL rewards.

In response to the lack of insufficient liquidity, Maple Finance said:

“As loans come due over the coming weeks, repayments from borrowers will increase the capital available in the pools which can then be withdrawn by lenders. Lenders will continue to earn interest and MPL token rewards during this time.

Additionally, Maple announced that it has no direct exposure to Celsius and Three Arrows Capital. However, borrowers on Maple have confirmed minimal exposure to 3AC and Celsius. In addition, Maple will contact its borrowers and collect updated financial statements.

Maple Finance founder Sid Powell defends the platform

Maple Finance founder Sid Powell in a June 22 tweet said the platform has a more antifragile system than CeFi. He asserts that a default in one pool does not impact lenders in another pool.

“There may be a delay in withdrawals pending repayment of loans, but withdrawals cannot be unilaterally frozen, making them more predictable and we are working to reduce delays through better design of mechanisms.”

Varinder is a technical writer and editor, technology enthusiast, and analytical thinker. Fascinated by disruptive technologies, he shared his knowledge on blockchain, crypto-currencies, artificial intelligence and the Internet of Things. He has been associated with the blockchain and cryptocurrency industry for a substantial period of time and currently covers all the latest updates and developments in the crypto industry.

The content presented may include the personal opinion of the author and is subject to market conditions. Do your market research before investing in cryptocurrencies. The author or publication assumes no responsibility for your personal financial loss.

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