PANews reported on November 6th that Morpho co-founder Merlin Egalite responded to the "liquidity shortage" experienced by some vaults. He stated that when the market is under stress, lenders often withdraw funds simultaneously, leading to increased capital utilization and decreased liquidity, and in extreme cases, even a temporary lack of available liquidity. However, this is not a systemic flaw, but rather a natural reaction mechanism of the lending pool under stress. To restore balance, the interest rate model automatically adjusts borrowing rates. For example, Morpho targets a capital utilization rate of 90%, meaning that in most cases, approximately 90% of deposited funds are lent out. When utilization spikes to 100%, borrowing rates increase fourfold. Typically, market interest rates can return to a balanced state of approximately 90% within minutes; under greater market stress, recovery may take several hours. Furthermore, the "liquidity shortage" is localized and controllable, occurring only in isolated market imbalances. A few days ago, only 3-4 of Morpho's 320 vaults experienced temporary liquidity shortages, while the rest operated normally. Therefore, the claim that "the entire agreement is experiencing a liquidity crunch" is misleading. Insufficient liquidity does not necessarily mean losses or bad debts; it simply means that a large amount of funds have been lent out in the short term. The market will react in real time, repricing the risk and seeking a new equilibrium.PANews reported on November 6th that Morpho co-founder Merlin Egalite responded to the "liquidity shortage" experienced by some vaults. He stated that when the market is under stress, lenders often withdraw funds simultaneously, leading to increased capital utilization and decreased liquidity, and in extreme cases, even a temporary lack of available liquidity. However, this is not a systemic flaw, but rather a natural reaction mechanism of the lending pool under stress. To restore balance, the interest rate model automatically adjusts borrowing rates. For example, Morpho targets a capital utilization rate of 90%, meaning that in most cases, approximately 90% of deposited funds are lent out. When utilization spikes to 100%, borrowing rates increase fourfold. Typically, market interest rates can return to a balanced state of approximately 90% within minutes; under greater market stress, recovery may take several hours. Furthermore, the "liquidity shortage" is localized and controllable, occurring only in isolated market imbalances. A few days ago, only 3-4 of Morpho's 320 vaults experienced temporary liquidity shortages, while the rest operated normally. Therefore, the claim that "the entire agreement is experiencing a liquidity crunch" is misleading. Insufficient liquidity does not necessarily mean losses or bad debts; it simply means that a large amount of funds have been lent out in the short term. The market will react in real time, repricing the risk and seeking a new equilibrium.
Morpho co-founder: The "liquidity shortage" in some vaults is not a systemic flaw, but a natural reaction mechanism under stress.
PANews reported on November 6th that Morpho co-founder Merlin Egalite responded to the "liquidity shortage" experienced by some vaults. He stated that when the market is under stress, lenders often withdraw funds simultaneously, leading to increased capital utilization and decreased liquidity, and in extreme cases, even a temporary lack of available liquidity. However, this is not a systemic flaw, but rather a natural reaction mechanism of the lending pool under stress. To restore balance, the interest rate model automatically adjusts borrowing rates. For example, Morpho targets a capital utilization rate of 90%, meaning that in most cases, approximately 90% of deposited funds are lent out. When utilization spikes to 100%, borrowing rates increase fourfold. Typically, market interest rates can return to a balanced state of approximately 90% within minutes; under greater market stress, recovery may take several hours. Furthermore, the "liquidity shortage" is localized and controllable, occurring only in isolated market imbalances. A few days ago, only 3-4 of Morpho's 320 vaults experienced temporary liquidity shortages, while the rest operated normally. Therefore, the claim that "the entire agreement is experiencing a liquidity crunch" is misleading. Insufficient liquidity does not necessarily mean losses or bad debts; it simply means that a large amount of funds have been lent out in the short term. The market will react in real time, repricing the risk and seeking a new equilibrium.
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