A burst of trading in a thinly traded Pendle yield market triggered $36.1 million in liquidations on Morpho early Tuesday, wiping out leveraged positions in about 14 minutes. Lenders came out whole, and both Pendle and vault curator Steakhouse Financial say the price feed behaved exactly as designed.
What happened in the market
The action unfolded in a Pendle yield token pool that rarely sees heavy volume. A sudden run of trades moved the price enough to trip liquidation thresholds for multiple leveraged borrowers. Those positions were closed out automatically, one after another, until the cascade ran its course.
Because the market was so thin, the price swings were sharp. But the protocol's mechanics held up: the liquidations cleared, and no lender lost money. The entire event took roughly 14 minutes from start to finish.
Why the price feed held up
Pendle and Steakhouse Financial, the entity that curates the vault where the trades happened, both pointed to the same takeaway: the price feed did its job. It's not that the feed prevented the liquidations—it's that it recorded real, market-driven prices accurately enough to trigger them at the right levels.
The two teams emphasized that the feed was built to reflect actual trading conditions, even when those conditions are volatile. In a thin market, a large trade can move the price, and the feed follows. That's what happened here, and the outcome was the intended one.
No losses for lenders
Lenders who supplied capital to the affected vaults didn't face a shortfall. The liquidations covered the borrowed funds, and the protocol's risk parameters held. That's a key point for anyone who's been watching DeFi lending markets for signs of strain.
The incident is a reminder that leveraged yield strategies carry real risk, especially in markets without much liquidity. But it also shows that the safety nets built into these protocols can work under pressure.
For now, the focus is on whether the market returns to normal activity. The trade activity that started it all is over, but traders will be watching to see if more leveraged positions remain exposed to similar swings.
