Pendle Oracle Triggers $36 Million in DeFi Liquidations
Pendle Oracle Move Causes $36 Million in Liquidations
A single trade in a Pendle yield market triggered $36.1 million in liquidations on the Morpho lending platform early Tuesday. The event lasted about 14 minutes and affected leveraged positions, but no lenders lost money. Both Pendle and Steakhouse Financial, the vault curator, stated the oracle—a tool that provides price data—worked as designed.
The liquidations occurred because the Pendle market for reUSD (a stablecoin) had far less liquidity than the Morpho market using its tokens as collateral. This mismatch left borrowers with little protection against price swings.
What Happened in the Market
- A wallet bought yield tokens in a Pendle pool holding $8.97 million, pushing the price of principal tokens down by 2.8%.
- This price drop triggered liquidations for borrowers on Morpho who had used the same tokens as collateral.
- Morpho recorded 33 liquidation events in 14 minutes, repaying $36.14 million in debt and seizing 38.6 million principal tokens.
- No bad debt was left behind—lenders were fully repaid.
- The largest three borrowers lost positions worth $13.01 million, $11.01 million, and $6.83 million.
Why the Oracle Worked as Intended
Pendle and Steakhouse Financial confirmed the oracle was set up correctly. The price feed used the lower of two values: the 15-minute average market price on Pendle or a fixed curve rising to $1 at maturity. When the market price fell, the oracle adjusted collateral values, triggering liquidations for positions with thin safety buffers.
Steakhouse withdrew liquidity from affected markets as a precaution before restoring it later. On-chain data shows the USDC market’s supply dropped 25% from $82.9 million to $62 million, while borrows fell 27% from $71.1 million.
Who Was Behind the Trade
Security firm PeckShield reported that a wallet ending in 690d bought reUSD yield tokens, pushing the implied yield to 20%. The wallet then sold the position, causing the liquidations. On-chain analyst 0scar suggested the liquidator and yield token buyer were the same entity, estimating gains of at least $360,000. This claim has not been independently confirmed.
Re Protocol, the issuer of reUSD, is investigating whether the price was intentionally manipulated but has not confirmed any wrongdoing. reUSD itself remained stable, with a net asset value of $1.0968 and a 6.44% annual yield.
Market Size Mismatch Was Flagged Earlier
The issue—a lending market much larger than the pool pricing its collateral—was publicly documented eight days before the liquidations. A user on Morpho’s governance forum noted that $55.9 million was borrowed against only $7.3 million in liquidity. Steakhouse had previously warned that thinly traded markets could be manipulated, though its April 2026 oracle upgrade did not cover Pendle principal-token markets.
Impact on Tokens and Platforms
- PENDLE, Pendle’s token, fell 4.3% in 24 hours to $1.74.
- MORPHO, Morpho’s token, dropped 5% to $2.52.
- Pendle’s fees reached $91,863 on Tuesday, up from $54,640 the day before.
- Pendle’s total value locked (TVL) is $1.18 billion, down from $10.3 billion a year ago.
What Is Confirmed
- $36.1 million in liquidations occurred on Morpho due to a price drop in Pendle’s reUSD principal tokens.
- The oracle functioned as designed, with no bad debt incurred.
- Liquidity was temporarily withdrawn and later restored by Steakhouse.
- Re Protocol is investigating potential manipulation but has not confirmed any.
What Remains Unclear
- Whether the trade was intentional manipulation or a routine market move.
- The exact profit made by the liquidator, as estimates vary.
- If future oracle configurations will change to prevent similar events.
Why This Matters for DeFi Users
This event highlights risks in leveraged DeFi strategies, especially when lending markets rely on thinly traded collateral. Borrowers with small safety buffers can face sudden liquidations, even if the oracle works correctly. Lenders, however, were protected in this case, showing that well-designed oracles can limit losses.
