Small Ethereum token price drop triggers $36 million in DeFi liquidations
A 3% price drop in PT-reUSD leads to $36.4 million in liquidations
A small price change in an Ethereum-based token called PT-reUSD triggered $36.4 million in liquidations on the lending platform Morpho. The liquidations happened after a single wallet made a large trade that pushed the token’s price down by about 3%.
PT-reUSD is a token tied to reUSD, a digital asset designed to hold a steady value like the U.S. dollar while paying interest. The token is part of Pendle, a platform that lets users split interest-paying assets into two separate tokens: one for the principal (the original amount) and one for the yield (the interest earned).
When the price of PT-reUSD fell, borrowers who had used it as collateral on Morpho lost their positions. These borrowers had borrowed the stablecoin USDC against PT-reUSD and used the borrowed money to buy more PT-reUSD, creating leveraged positions with little room for error.
How the liquidations happened
- A single wallet bought a large amount of YT-reUSD, the yield token paired with PT-reUSD, pushing its implied annual yield up to 20%.
- The buying pressure caused PT-reUSD’s price to drop by about 3%.
- Borrowers on Morpho had used PT-reUSD as collateral to borrow USDC, often repeating the process to increase their exposure.
- Their positions had less than 3% protection against liquidation, so the price drop triggered automatic sell-offs to repay the loans.
- The liquidations totaled $36.4 million.
What the oracle showed
Morpho relied on an oracle—a tool that provides price data—to determine when to liquidate positions. The oracle used the lower of two values: the average trading price of PT-reUSD over the last 15 minutes or a fixed schedule that gradually rises to $1 at maturity.
When the market price fell below the fixed schedule, the 15-minute average became the lower value, triggering the liquidations. Pendle stated that the oracle worked as designed.
No losses for lenders, underlying asset unaffected
Steakhouse Financial, which manages lending markets that accept PT-reUSD as collateral, reported that lenders in its vaults suffered no losses. The liquidations raised enough funds to repay the loans, so no bad debt was created. The underlying reUSD asset remained stable and unaffected.
What is still unclear
It is not confirmed whether the large trade was intentional or accidental. The source does not provide details about the wallet’s owner or their motives.
Why this matters for DeFi users
This event shows how small price movements can have large effects in decentralized finance (DeFi), especially for leveraged positions. Borrowers using tokens like PT-reUSD as collateral may face higher risks if their positions have little margin for error. Lenders, however, appear to have been protected in this case.
