Morpho borrow rates hit 42.8% on a PT-reUSD market after $13.7M left in 14 minutes

Morpho borrow rates on a single market that now carries $126 million of debt reached 42.8% at 09:00 UTC on 30 October, the highest hourly reading, after lenders pulled $13.7 million out in 14 minutes the night before and left no cash to borrow or withdraw, according to Morpho API data read by Coindaro on 1 November. The market lends USDC against PT-reUSD-10DEC2026, a Pendle principal token. By 05:41 UTC on 1 November the rate was back to 11.0%, after 9.5% at 05:00 UTC.

The Defiant reported the spike on 31 October as a roughly 40% rate after liquidity in one reUSD-backed market “vanished in two hours”, though only its headline and subhead loaded for us. The API’s hourly series agrees, and its transaction records narrow the drop to 14 minutes. They show how the cash left. They do not show why: nobody we could find has explained it, and neither Morpho, Pendle, Re Protocol (the issuer of reUSD) nor any vault curator has commented that we found.

This was one market. Its $126.15 million of debt is about 2% of the $5.60 billion borrowed across Morpho, by our arithmetic on DefiLlama figures. It is, however, the largest market with a PT as collateral on Ethereum in the Morpho API, nearly four times the next one.

Fourteen minutes to empty, almost 13 hours near zero

At 20:00 UTC on 29 October the market looked ordinary, with a 9.7% borrow rate and $13.7 million sitting idle. Hourly readings since 06:00 had stayed around 9% to 10%, apart from one at 12.3% at 14:00.

Borrowers did not cause what came next. The API records no new loan on this market between 20:00 and 22:00 UTC. Seven withdrawals took $13.7 million between 20:48:35 and 21:02:35 UTC, and the last of them, $3.9 million, brought idle cash to about zero.

Those seven came from six addresses. Two are the market adapters of vaults, by the API’s records: Pendle Ecosystem USDC took $3.9 million and Pendle Ecosystem High Yield USDC took $2.9 million, and the API lists Armitage by Wintermute as curator of both. The other four addresses hold no contract code, so they look like plain wallets, and one of them took $4.0 million. Withdrawing from a lending blockchain that runs exactly as written when it is called, holding and moving funds according to its code, without an intermediary able to change the outcome.">smart contract holding reserves of two or more tokens, supplied by users, that a decentralized exchange uses to execute trades automatically at a price set by a formula.">pool is normal use. A vault may simply have been meeting its own redemptions, and the records give no reason.

Cash then stayed near zero until 09:49 UTC on 30 October, just under 13 hours later, and all 12 hourly readings from 22:00 to 09:00 show $0.0M. The market did not stand still. Borrowers from 56 addresses repaid $12.1 million in that stretch, and no one took a new loan, because no cash was there to lend. Lenders took each repayment almost as it arrived: at 22:23:47 UTC a borrower repaid $1.1 million, and 12 seconds later the Pendle Ecosystem High Yield USDC vault withdrew the same sum.

The cash came back through deposits. The RockawayX Confidential RWA USDC vault put in $2.3 million at 09:49:11 UTC, and RockawayX USDC Yield added $6.4 million at 09:56:11 UTC. Withdrawals absorbed part of that, but $3.6 million was idle at 10:00 UTC and the rate had dropped almost 11 points in an hour. Total supply had fallen from $142.7 million at 20:00 UTC to $118.2 million at 09:00 UTC, and debt from $128.9 million to $118.2 million.

Source: Morpho API, hourly series and market transactions, Ethereum market 0x1e9d…fc64, read on 1 November 2026. Not every hour is shown. These are instantaneous rates at each reading, not averages.

The aftermath was uneven. The rate climbed back to 18.6% at 16:00 UTC on 30 October with $9.0 million idle, and did not touch 9.5% again until 23:00. On 31 October it ran between 9.4% and 13.4%. The Defiant’s subhead says rates across the four markets it tracks eased to roughly 9%-13% by 31 October, though we do not know which four.

Why the Morpho rate jumped to 42%: a curve that multiplies by four

Morpho markets price loans with an algorithm called AdaptiveCurveIRM, described in Morpho’s documentation. It aims for 90% utilization, the share of deposits that is lent out. At 90%, borrowers pay the “rate at target”. As utilization approaches 100%, the rate climbs along a curve until it reaches four times that level. Below target it falls, towards a quarter of the target rate at 0%.

Two things then happen at once. The rate jumps with each deposit, borrow or withdrawal because utilization changes. And the rate at target keeps drifting upward for as long as utilization stays above 90%, so that a market stuck at 100% for five days would see it roughly double, the docs say.

This episode fits both effects to the decimal, once compounding is taken out. When the market emptied, the API’s rate at target was 8.7% as an APY, or about 8.4% as a simple annual rate. Four times that is 33.4%, which compounds to 39.7%, the exact reading at 22:00 UTC. Over the next 11 hours the documented adjustment speed of 50 per year should lift the underlying rate by about 6.5%, which gives an APY of about 42.8%, the reading at 09:00 UTC. That arithmetic is ours.

Nobody set a 42.8% rate. The formula produces it when a market runs out of cash and stays out. The design is meant to pull lenders in and push borrowers out until liquidity returns, and here that took just under 13 hours.

The drift left a mark. The rate at target stood at 8.7% as an APY before the squeeze and at 9.6% at 05:41 UTC on 1 November, so the rate at 90% utilization on this market costs about a point more than it did.

The curve still bites at normal levels. Between 05:00 and 05:41 UTC on 1 November, idle liquidity went from $14.6 million to $13.3 million and the rate went from 9.5% to 11.0%. The market sits at 90.47% utilization, with $139.43 million supplied. For the basics of how pools set these rates, see our guide to crypto lending and borrowing.

The same night as the Binance hack, but no reported link

The timing will draw questions. The Binance hack began around 20:05 UTC on 29 October, according to TRM Labs, and the first of these withdrawals came at 20:48:35 UTC. Aave froze markets that night, unfroze Ethereum Core at 12:26 UTC on 30 October and said at 13:57 UTC that all its V3 and V4 markets were open.

That is all we can say. No source we found connects the Morpho withdrawals to the hack, and the records show addresses and amounts, not motives. Two events on the same night are not evidence that one caused the other.

What depositors and looped borrowers faced

A depositor at 100% utilization can only take out cash that borrowers repay or new lenders bring in. Here that lasted almost 13 hours. Someone who wanted out at 23:00 UTC had to wait for cash to appear and reach it before another lender did. The supply APY matched the borrow rate while the pool was full, 42.8% at 09:00 UTC, and was 9.9% at 05:41 UTC on 1 November, but most of that money could not move while the rate was high.

People who deposit through a vault rely on its curator’s allocation. The API lists 15 vaults for this market. We could read the amount for only two of them: “Smokehouse USDC”, curated by Steakhouse Financial, with $2.8 million here out of an $11.3 million vault, and “Clearstar USDC Reactor” with nothing. The direct lenders behind the rest of the $139 million are not identified in what we read.

Borrowers had a different problem. PT tokens are bought at a discount and pay a fixed yield at maturity, as our Pendle explainer sets out, and a common trade is the loop: borrow USDC against the PT, buy more PT, repeat. The cost of that debt went from under 10% to above 40% while the PT’s yield stayed fixed. Pendle’s implied yield on this token was about 11% before the August episode below, according to Cryptobriefing, so any loop earning near that figure would have been losing money while the squeeze lasted. Our guide to looping and borrowing against crypto covers those mechanics.

Thirteen hours at that rate costs little in absolute terms: about 0.05% of the debt by our arithmetic, or about $500 on a $1 million loan, against about $140 at the rate before. The larger exposure is what happens if it lasts, because borrowers can only get out by repaying in USDC. The API records no liquidation on this market between 29 October and the morning of 1 November, and we saw no report of bad debt.

August was a different failure on the same token

PT-reUSD borrowers on Morpho have been hit before, by another route. On 25 August, Cryptobriefing reported, a wallet made 11 Pendle trades between 04:28 and 04:37 UTC, turning about $320,000 of SY-reUSD into more than 9.5 million YT-reUSD. That pushed the implied yield above 20% and the PT price down about 3%.

Positions were sitting close to the 91.5% loan-to-value limit, so 33 liquidations followed across 19 to 20 positions, repaying about $36.4 million of debt with no bad debt, the outlet said, and Pendle said it was reviewing its oracle configurations. The Morpho API shows 16 of those liquidations on this USDC market, with $35.19 million repaid.

August started with the collateral’s price. October started with cash leaving the pool, and we found no report of a move in the PT.

Where things stand, and the 10 December date

Morpho’s total staking or liquidity, measured at current market prices. It is the main size metric in DeFi.">value locked dipped that week, with no evidence of a link to this market. DefiLlama put it at $11.33 billion on 29 October and $10.59 billion in its 30 October reading, then $11.04 billion on 31 October and $11.13 billion at 04:52 UTC on 1 November. The $24 million that left this market is a small part of that dip. The sibling USDT market against the same PT had $15.5 million borrowed at 8.1% on 1 November, with 89.5% utilization.

The date to watch is 10 December, when PT-reUSD matures. Another market offers a warning of how debt can linger, without being a forecast for this one. USDC lent against PT-RLP-9APR2026 still shows $32.21 million borrowed of $32.21 million supplied, nearly seven months after that token matured. The API reports $160 of idle liquidity and a borrow APY of 297,907%. That is raw API output, we found no press report on it, and no source says reUSD will end the same way.

One more number moved this week, with no evidence of a connection. MORPHO was up 10.44% over 24 hours in Coindaro’s market snapshot around 05:46 UTC on 1 November. Coindoo reported $2.40 at 17:04 UTC on 31 October, about 15.2% up on the day. Those are different providers and windows. Coindoo gives chart levels and no news cause, and we found none. Nothing ties the move to these rates.

Still open: why six addresses left within 14 minutes, and whether Armitage or any other curator will explain it.