3% Token Swing Triggers $36M Ethereum DeFi Liquidations

According to CoinDesk, a roughly 3% token price fluctuation triggered approximately $36 million in liquidations on the lending platform Morpho. The event began when a wallet made large purchases of Pendle-issued yield tokens (YT-reUSD), pushing the implied annualized yield to 20%, before quickly selling off, causing the corresponding principal tokens (PT-reUSD) to drop by about 3%.

Previously, some traders had deposited PT-reUSD into Morpho, borrowed USDC stablecoins, and then bought more PT-reUSD in a looping strategy, leaving their leveraged positions with less than 3% margin before liquidation. Morpho relies on oracle prices, taking the lower of the 15-minute average trading price of PT-reUSD and a fixed curve that approaches $1 at maturity. When the market price fell below this curve, liquidations were triggered.

Pendle stated that the price source was configured correctly and operated as designed. Steakhouse Financial, which manages the related lending vault, confirmed that lenders in its vault were unaffected, with no bad debt incurred, and that liquidation proceeds were sufficient to cover loans. Steakhouse had withdrawn funds during the investigation but has since redeployed them, and the underlying reUSD assets remain unaffected.