Morpho's co-founders respond to reports of "insufficient liquidity" in some pools: it's not a system vulnerability, but a natural operational mechanism under pressure.

BlockBeats reports that on November 6th, Morpho co-founder Merlin Egalite responded to concerns about “liquidity shortages” in some liquidity pools by explaining:

"When the market is under pressure, people tend to reduce risk, which often leads many lenders to attempt to withdraw all their funds at once. This causes the utilization rate to rise and liquidity to decrease, and in extreme cases, there may be no available liquidity in the short term. This is not a system flaw but a natural response mechanism of the lending pools under stress. To restore balance, the interest rate model automatically raises borrowing rates.

For example, in Morpho, the target utilization rate is 90%, meaning that about 90% of deposited funds are typically lent out. When utilization hits 100%, the interest rate increases fourfold. In most cases, market rates usually return to equilibrium (around 90% utilization) within a few minutes. During periods of high market stress, this recovery might take several hours.

Additionally, the so-called ‘liquidity shortages’ are localized and manageable, occurring only in specific markets that are out of balance. A few days ago, out of Morpho’s 320 liquidity pools, only 3–4 experienced brief liquidity shortages, while the rest operated normally. Therefore, claims that the ‘entire protocol’s liquidity has dried up’ are misleading.

Liquidity shortages do not mean losses or bad debts. They simply indicate that a large amount of funds are borrowed in the short term, and the market responds in real time by repricing risk and seeking a new equilibrium."