After seeing its token KUJI crash by more than 50% on Thursday due to overleveraged positions, the Kujira team is now in talks for a bailout to salvage the project.
In a Telegram post on Friday, the team confirmed they were in talks with Atom Accelerator DAO (AADAO) and other foundations for a solution. AADAO is a community-oriented fund for projects building under the Cosmos (ATOM) ecosystem.
“We had a really good call with AADAO and it’s looking like there’s a good solution,” the team wrote. “We’ve had incredible support from various cosmos teams and foundations and it looks like a bright future is ahead.”
KUJI’s problems started with the liquidation of its leveraged positions
The trouble for Kujira escalated yesterday as the team’s overleveraged positions on KUJI got liquidated on the claim that “people targeted the team positions.” The cascade of liquidations that ensued led to KUJI price tanking by over 50% below $0.5 as of August 1.
At the time of writing, the price of KUJI’s stablecoin, USK has yet to make a full recovery. The stablecoin USK fell to as low as $0.87 before also recovering to $0.91. KUJI fell by another 22% to $0.39 on Coingecko. It had dropped to $0.258 early in the day before slightly recovering to the current price.
Kujira needs a bailout
Kujira needs as much bailout as it can receive, as the situation seems more dire than the project has been willing to let on. USDC lenders on Kujira are currently stuck with their holdings on the protocol.
Oh shit! $KUJI$USDC pic.twitter.com/eBIGQvExvY
— .. 🉐️.. (@wenmoonwenlambo) August 2, 2024
Kujira’s USDC treasury has been depleted to the extent that the liquidation engine does not have enough to repay lenders. Currently, there are still millions that need to be repaid. Although the USDC deposit rate has gone up to over 290% APR, it appears too risky for potential investors. Many of them are cautious there is a slim chance they will be able to regain their asset if they lend their USDC.
If Kujira secures a bailout large enough to cover the USDC borrowed from its treasury, it could help clear the backlog of pending USDC withdrawals by lenders. It could also mark the beginning of a resolution, starting with lowering the utilization and APR rates. This will allow for the loans to be settled without the liquidation bids kicking, which will, in turn, save prices from dipping further.
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