Solend struggles to pay down its SOL loan owing to market congestion
Solend is in danger of amassing bad debt as a result of its substantial underwater loan position.
A significant loan position on the Solana-based lending platform Solend is currently in the red, but infrastructural concerns prevent it from being liquidated effectively. Consequently, the technique is susceptible to incurring bad debt.
A 50% decline in the price of solana (SOL) during the previous three days has diminished the value of the loan’s collateral. Under normal circumstances, other market players would have liquidated the debt. However, the platform has encountered network congestion-related oracle difficulties, undermining their attempts.
This loan is held by the user with the largest position in the main pool. At the time of writing, the user owes the protocol $29.7 million in USDC against $32.6 million in SOL collateral. Solend’s liquidation threshold is 85%, which corresponds to $27.6 million. To lower the debt below the liquidation level, the protocol must sell approximately $2 million worth of SOL collateral.
Due to Solana’s congestion concerns, the protocol is trying to complete the liquidation of collateral from the position in order to save its assets. The lending site itself includes a warning that reads, “Solana is now overloaded, and oracle updates are sporadic; users may encounter withdrawal difficulties.”
The initiative explained that despite the technological obstacles, the enormous debt is being liquidated slowly.
“Congestion concerns on Solend have alleviated, and partial liquidations of the whale account have been taking place without serious difficulty,” tweeted Solend.