On Tuesday, a massive purchase of yield tokens (YT) on Pendle caused an approximately 3% drop in the principal token (PT-reUSD) backed by reUSD, triggering a cascade of liquidations on Morpho totaling $36.4 million. No technical flaw or hack was involved: the positions in question relied on leverage with less than 3% margin before liquidation. The oracle used by Morpho applied the lowest market price, derived from the average of transactions over fifteen minutes, forcing the closure of positions whose health factor fell below 1.03. Steakhouse Financial, curator of the affected markets, stated that no bad debt was created and that lenders suffered no losses.
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