Pendle Oracle Move Triggers $36 Million of Liquidations

On Tuesday, a thinly traded Pendle yield market caused a cascade of liquidations on the Morpho lending platform, wiping out roughly $36 million of leveraged debt in about fourteen minutes while leaving lenders whole.

What happened

During a high‑volume purchase of reUSD yield tokens in Pendle’s Dec‑10 pool (approximately $9 million in liquidity), the 15‑minute average price of the underlying principal token fell by 2.8%. The drop triggered the oracle‑based liquidation threshold in Morpho, where the same principal token is used as collateral.

Scale of the event

• 33 liquidation events recorded between 04:37:47 UTC and 04:51:23 UTC.
• Total debt repaid: $36.14 million.
• Principal tokens seized: 38.6 million.
• USDC market accounted for $35.19 million of the liquidations; USDT market for $0.96 million.
• Largest three borrowers lost $13.01 million, $11.01 million and $6.83 million respectively.
• Realized bad debt: zero.

Mechanics of the oracle

The Pendle oracle references the lower of two values: a 15‑minute average of the principal token’s market price on Pendle, and a fixed curve that rises to $1 at maturity with a 6 % annual discount. When the market price dipped, the average became the reference, reducing collateral values for looped positions that were already operating with health factors just above 1.03.

Liquidity response

Steakhouse Financial, the Morpho market curator, withdrew liquidity from the affected markets after the price move, reducing USDC market supply by about 25 % and borrows by 27 % before gradually restoring it.

Who was involved

Security firm PeckShield identified a wallet (ending in 690d) that purchased the yield tokens, pushing the implied yield to roughly 20 % before dumping the position. On‑chain analyst 0scar linked the same entity to the liquidator contract, estimating realized gains of at least $360 k.

Protocol reactions

Pendle confirmed the oracle functioned as designed and was not misconfigured. Re Protocol, which issues reUSD, said it is investigating whether the price movement was intentional and is working on a safer oracle configuration. No protocol has publicly alleged manipulation.

Context and risk factors

The incident highlights a known failure mode for looped yield strategies: a lending market that is significantly larger than the underlying pool can be vulnerable when the pool’s price feed is thinly traded. The size mismatch was flagged publicly weeks earlier on the Morpho governance forum.

Despite the rapid liquidations, lenders were fully protected, and the event contrasts with prior exploits where oracle mispricing created bad debt.