A 3% drop in the PT-reUSD token caused about $36.4 million in liquidations on the decentralized lending platform Morpho. This decline was triggered by a large trade in the yield token YT-reUSD, which pushed yields up before the position was exited, causing PT-reUSD's price to fall. Many borrowers on Morpho used highly leveraged strategies involving PT-reUSD as collateral, which left little margin for losses. As the token price fell, Morpho's automatic liquidation system sold off positions that no longer met collateral requirements. Despite the liquidations, the underlying reUSD asset remained stable, and no bad debt was reported. Morpho and its partners are reviewing the incident and temporarily paused lending in affected markets before resuming capital deployment.
