Wallet manipulates reUSD market and causes $36M in liquidations

A single wallet manipulated the reUSD yield market on Pendle on Monday by buying YT reUSD tokens on a large scale, causing the implied annual percentage yield (APY) to rise to over 20%. The wallet then dumped its entire position, leading to approximately $36.39 million in forced liquidations of PT reUSD positions on Morpho.

In brief:

• Wallet 0x854e…690d bought YT reUSD tokens in bulk, driving the implied APY to over 20%.
• After the dump, yield rates quickly fell back to around 12-13%.
• The sudden price movement led to more than $36 million in liquidations on the Morpho protocol.

Yield spikes to 20% in minutes

Trading data shows that the wallet in question made several large purchases of YT reUSD tokens, based on USDC, via the Pendle protocol within a short period. This caused the implied APY to rise from around 11% to a peak of over 22% at around 12:42, as can also be seen in that day’s chart.

YT tokens on Pendle represent the right to future yields. Buying them en masse raises the implied interest rate priced in by the market. This has direct consequences for PT tokens, which are used as collateral in automated lending positions on protocols such as Morpho.

Dump triggers $36 million in liquidations on Morpho

After the yield had been artificially pushed up, the same wallet sold the YT tokens in several tranches. Order book data shows that tens of millions of dollars were sold at implied interest rates ranging between 11% and 21%.

The sharp drop in yields that followed the dump put pressure on the value of PT reUSD tokens used as collateral in Morpho lending positions. As a result, so-called PT reUSD loop positions, in which users repeatedly borrow against their PT tokens, were forcibly liquidated. According to PeckShieldAlert, total liquidations reached approximately $36.39 million.

After the manipulation, the implied APY for PT reUSD (USDC) stabilised at around 12.8%, with a maturity date of 10 December 2026.

How vulnerable DeFi is to this type of attack

The incident shows how vulnerable automated lending protocols are when yield markets are manipulated. PT tokens are increasingly used as collateral in DeFi, but their value is directly linked to the implied interest rate priced in by the market. A rapid rise in yields followed by an equally rapid fall can therefore cause significant damage to other users in a short space of time.

It is not the first time that a single wallet has triggered liquidations in DeFi protocols through targeted market movements. Whether this amounts to deliberate market manipulation or a failed trading strategy cannot be established with certainty based on the available information.