Decentralized lending protocol Morpho recorded approximately $36.39 million in liquidations of PT reUSD loop positions after an anonymous wallet address beginning with 0x854e repeatedly bought YT reUSD, pushing the expected annualized yield from around 11% to above 20%, according to PeckShieldAlert. The address then quickly sold its YT reUSD position, triggering cascading liquidations across leveraged PT reUSD loop positions.
Pendle, the yield tokenization protocol behind the PT and YT token structure, later clarified that the liquidations were not caused by an oracle configuration error. Instead, a brief 3% drop in the price of PT-reUSD reduced collateral values for users who had repeatedly borrowed USDC on Morpho to amplify exposure. Pendle’s oracle uses the lower of the PT’s 15-minute average market price and a benchmark price assuming a 6% annual discount rate through maturity. Positions with health factors below 1.03 — meaning less than 3% buffer — were liquidated.
Pendle emphasized that the oracle worked as designed, no bad debt emerged, and Morpho’s Pendle ecosystem vaults were unaffected. The event underscores the risks of leveraged yield trading in DeFi, where rapid shifts in yield expectations or small price declines can trigger cascading liquidations.
