A Call for Transparency in the Vault “PT-USD0+±27MAR2025 / USDC”
For weeks now, it has become clear that the behavior of certain curators in the PT-USD0+±27MAR2025 / USDC vault has been questionable, to the point of appearing dishonest. Users are being subjected to measures that seem punitive, creating undue pressure and big losses.
After raising these concerns in Morpho’s Discord channel, I was encouraged to share my experience with the community—so here it is.
What’s Happening
The curators are aggressively tightening conditions in the vault. When confronted on Discord, the largest curator justified these actions with the following explanation:
“SY/PT LP is very unbalance now, due to YT buyers speculating on USUAL rewards.
SY part is what interest us here as this is what we use to liquidate positions if needed. We also have a pocket to cover positions that could not be instantly liquidated.
But unfortunately above this level it starts to be at risk for the lenders.”
While this argument may sound technical, the data does not support such claims:
Minimal price variation for PT-USD0++ tokens: Over the past two months, the max price fluctuation has been just 3%.
No liquidations: Despite a bullish trend in USUAL and the decrease in PT token prices, there have been no liquidations in the vault.
Sufficient market liquidity: In an extreme scenario involving the sale of 5M PT tokens in one go, the slippage would be under 2%, the vault have a liquidation LTV of 91.5%. The curator can handle massive liquidations without incurring in bad debt.
Forcing PT users to sell their positions only decrease the liquidity for liquidations. Don’t even have any sense from the perspective of “risk management”.
Now the speculative part:
USUAL’s upcoming TGE: With over $200m plus daily drops of 1 to $2m in tokens set to be launched soon, curators and PT holders may be anticipating a drop in token price. Curators knows PT holders are forced to hold and they taking unfair advantage of the situation.
Exorbitant APR: Users with leverage positions are currently facing rates as high as -2000% APY, seemingly designed to force sellings\liquidations and squeeze maximum profits for the curators.
A Call for Action from Morpho
Morpho needs to step in. This behavior not only harms users of the platform but also threatens its reputation. The justification of “risk management” cannot excuse practices that clearly exploit the community.
As an Usual Morpho vault lender user, please also take in consideration us, lenders, as we dont feel ready to loose money due to degen borrowers and insufficient liquidity for liquidator bot during liquidation.
Happy to see Curators taking both parties into account (borrowers, lenders), whilst borrowers are speculating on a future token using Pendle PT as collat, lenders dont want to bear bad debt risk.
Great to see precautionary measure from Curators to avoid lenders providing supply into any market with tight liquidity, and cap market accordingly.
Thx for monitoring
Forcing PT token holders to sell at the worst time or get liquidated by the borrow rate only increase your risk, because the SY part of the LP get thiner by this actions (PT selling).
So actually these curators are not protecting you from nothing but the opposite.
While we have a safety reserve to cover liquidations (in case SY becomes unavailable), we are reaching a threshold where lenders could be at risk if we do not reduce the supply allocation.
We also want borrowers like you to be able to exit their positions at will without any liquidity concerns. Currently, a borrower looking to execute a $5M sell market order for PT cannot do so.
Our primary role is to provide the best risk-adjusted performance for lenders, ensuring their security while allowing borrowers to borrow under the best possible conditions.
These conditions were no longer met for this PT market. As a result, we proceeded with a re-balancing, and the supply allocation was lowered to $20M.
Today, rates have returned to normal. This rate increase lasted up to 30 hours.
Few days after that post, they deposited dozens of millions in the vault and let people to create enormous positions, one guy created a 35m$ position… ofc they weren’t ever worry about liquidations.
And today we see the last piece of the puzzle, after letting people create huge PT leverage positions, then ultra-rekt everyone in that vault dropping the floor and pushing the rates over 3 figures.
