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Algorand Foundation faces a $35M exposure to Hodlnaut. Are investors safe?

Algorand Foundation
TL;DR Breakdown
  • Algorand Foundation details $35 million in assets at risk from crypto lender Hodlnaut
  • Hodlnaut warns that the Ethereum Merge could put its assets at risk
  • Algorand returns with an updated mainnet, now processing up to 6,000 TPS

The last few months have been a long and trying trip for crypto investors. This may go down as the worst crypto winter in history. And Algorand foundation has been added to the list of entities affected by the winter.

The Algorand Foundation has revealed that it has a $35 million hole in its balance sheet. This is as a result of exposure to embattled cryptocurrency lending firm Hodlnaut, which has paused withdraws since August 8.

Hodlnaut, a crypto lending firm, decided in August 2022 to freeze withdrawals and deposits as well as token swaps. Hodlnaut reasoned that the market conditions were poor. The news was no surprise to the crypto world, as it comes on the heels of a long list of other firms taking similar measures. The Algorand Foundation finds itself in a difficult $35 million situation that could put its investors’ funds at risk.

Algorand Foundation discloses exposure to a troubled crypto lender

The Algorand Foundation is a high-performance blockchain infrastructure built on the Ethereum network with smart contract capability. The Algorand Foundation is a not-for-profit community group focused on expanding the Algorand ecosystem.

 The Algorand Foundation announced this on its website on September 9 2022. Furthermore, the Foundation stated that it is doing everything possible to maximize asset recovery through legal channels.

Today we are informing the community that the Algorand Foundation has a $35 million USDC exposure to Hodlnaut, a Singapore-based crypto lender that was placed under Interim Judicial Management after suspending withdrawals from its platform on August 8, 2022.

Algorand Foundation

 Similar circumstances have resulted in considerable losses for crypto investors. However, this case differs from the others, and investors may not suffer as much as they did previously. The Algorand Foundation states that its $35 million exposure is less than 3% of its assets and sufficient for daily operations. As a result, it is unlikely to be affected or experience liquidity issues.

The Algorand Foundation stated that the largest amount of investment locked on their platform was “locked, short-term deposits.” However, due to Holdnaut suspending withdrawals, these funds are now inaccessible.

The Algorand Foundation Network has just announced a major capacity increase, with the most recent update allowing for significantly enhanced network performance. Cross-chain connections and transfers are now possible without the need for a bridge or validator networks, thanks to the upgrade.

According to the organization’s official statement, this would potentially address the issues that blockchain interoperability is currently facing. Not only is the network carbon-neutral, but it is also FIFA’s official blockchain partner and will soon power its non-fungible tokens.

Algorand fast upgrade is a game changer 

Algorand has again amazed the community with a significant upgrade to its technology. And it’s ready to turn up the heat even more. With this new upgrade, Algorand is said to be quantum-secure and can now execute up to 6,000 transactions every second. However, this isn’t anything exceptional for ALGO; it has long been recognized as one of the cryptocurrency networks that processes transactions quickly.

Although other crypto networks are trying to compete with ALGO, none have been able to come close. In fact, ALGO has recently upgraded its mainnet, and transaction speeds are now faster than Bitcoin and Ethereum. This upgrade means that other crypto networks may literally be left in the dust.

ALGO not only boasts a fast and furious vibe but has also filled in the gaps surrounding third-party interference. The recent upgrade to the mainnet includes a state-of-the-proof integration that allows users to easily create cross-chain communications without involving any middleman. This also helps prevent cyberattacks.

With the mainnet upgrade, ALGO has seen a boost in price. According to CoinMarketCap, Algorand’s value is up by 6.88 percent or trading at $0.3274 as of publishing time. Despite the price increase, ALGO has fallen by 91.63% from its all-time high.

Algorand Foundation has exposure to 3AC

Algorand’s news comes as the crypto industry takes yet another hit. It is important to note that Algorand Foundation also has exposure to collapsed cryptocurrency hedge fund Three Arrows Capital. According to court papers, the Foundation and the hedge fund made a single OTC transaction, but 3AC defied lockup restrictions.

Hodlnaut was placed under Interim Judicial Management after it announced that user withdrawals would be suspended on August 8. According to court documents, Hodlnaut lost $189.7 million UST (out of a total holding of $317 million) before the market crashed.

Judicial management is a form of debt restructuring in which Hodlnaut manages the business, property, and assets of a distressed company. The company will also be protected from legal proceedings by third parties.

Struggling cryptocurrency lender, Hodlnaut warned that if the Ethereum blockchain’s pending upgrade, known as the Merge, causes a spate of price volatility in virtual currencies, its assets would be at risk. According to a blog statement released Monday, wild fluctuations in the prices of Ethereum-linked tokens could force “smart contracts” to sell those assets.

Florence Muchai

Florence Muchai

Florence is a crypto enthusiast and writer who loves to travel. As a digital nomad, she explores the transformative power of blockchain technology. Her writing reflects the limitless possibilities for humanity to connect and grow.

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