Someone spent $320,000 on a Tuesday morning and triggered $36.4 million in liquidations. The DeFi equivalent of tossing a lit match into a room full of gunpowder, except nobody technically broke any rules.
On August 25, a wallet identified as 0x854e…690d executed 11 consecutive trades on Pendle between 04:28 and 04:37 UTC, converting roughly $320,000 worth of SY-reUSD into over 9.5 million YT-reUSD. That nine-minute burst of activity pushed the implied annual yield for the PT-reUSD/YT-reUSD market past 20%, temporarily cratered the price of PT-reUSD by about 3%, and set off a chain reaction of automated liquidations on Morpho.
How $320K moved $36.4M
To understand what happened, you need to understand how Pendle’s yield-splitting mechanism works. When you deposit a yield-bearing asset into Pendle, it gets split into two components: a Principal Token (PT) and a Yield Token (YT). PT represents the principal value at maturity. YT represents the yield stream until that maturity date. They have an inverse relationship: when YT prices rise, PT prices fall, and vice versa.
The wallet in question aggressively bought YT-reUSD, which spiked the implied yield and simultaneously dragged down the PT-reUSD price. That other side happened to be borrowers on Morpho who had posted PT-reUSD as collateral. With loan-to-value ratios hovering near 91.5% before the incident, there was almost no room for error. A 3% price drop was more than enough to push positions underwater and trigger Morpho’s automated liquidation engine.
