A 2.8% decline in PT-reUSD early Tuesday set off 33 liquidations across Morpho's lending markets, repaying $36.14 million in debt in just under 14 minutes. The events, logged between 04:37:47 and 04:51:23 UTC, hit the USDC pool hardest.
The Numbers Behind the Cascade
The USDC market carried the bulk of the damage, with $35.19 million in debt repaid. The USDT market accounted for $956,000 of the total. Liquidators seized 38.6 million principal tokens across the 33 events.
At the time, the affected Morpho market held $67.5 million in collateral against $52.2 million in borrows. That left a collateral ratio thin enough for a 2.8% move to push positions past the 91.5% liquidation threshold.
How the Oracle Read the Price
The oracle at the center of the drop doesn't rely on a single spot price. It takes the lower of two inputs: the 15-minute average price of PT-reUSD on Pendle's market and a fixed curve that rises to $1 at maturity. With the Pendle pool holding only $8.97 million in liquidity, the average price had room to move sharply.
That design means the oracle is intentionally conservative—it picks the cheapest valuation to protect lenders. But on Tuesday morning, that conservative reading triggered the chain reaction.
Platforms Respond
Pendle, the platform that issues PT-reUSD, said the oracle was configured correctly and functioned as intended. Steakhouse, which manages the market, said lenders were unaffected and no bad debt was created.
In other words, the liquidations did their job. The losses were absorbed by the collateral being sold, not by the lending side.
The Run to Maturity
The underlying pool matures on December 10, 2026. As that date approaches, PT-reUSD's price is designed to converge toward $1. That convergence will put the oracle's logic to the test again—not just in a sharp drop, but in the slow grind upward.
For now, the question is whether a similar 2.8% move can hit the market again before maturity. The collateral ratio, the liquidity in the Pendle pool, and the oracle's response will all be watching closely.
