TechFlow News, June 21: In response to the MSUSD de-pegging incident, Mainstreet posted on X addressing market concerns surrounding the Morpho market, proof-of-reserves, and liquidity. Mainstreet clarified that MSUSD remains fully asset-backed and that the current issues do not constitute asset loss or insolvency.
Mainstreet explained that the discontinuation of its proof-of-reserves service has led to the anticipated suspension—within the next 24 hours—of the oracle supporting the Morpho market. This development triggered market concern and prompted leveraged loop borrowers to rapidly unwind positions, causing borrowing rates to rise significantly. While the core investment portfolio remains highly certain from a net asset value (NAV) perspective, challenges include transaction fees, widened bid-ask spreads, market-maker discounts, and liquidity discounts tied to maturity and position size.
Mainstreet added that it is implementing several measures: integrating a new proof-of-reserves provider to restore independent verification as soon as possible; redeploying liquidity into the minter/Morpho ecosystem; and, if necessary, stepping in as the “last-resort liquidity provider” and liquidator to prevent disorderly market movements. Its immediate priority is safeguarding NAV and maximizing protocol liquidity. Should borrowing rates continue rising and trigger liquidations, Mainstreet stands ready to act as the “last-resort liquidator” to mitigate bad debt risk.
However, given that it is currently the weekend, market liquidity is constrained and market-maker quotes are weaker than during regular trading hours—temporarily slowing asset exit velocity. Market conditions are expected to become clearer over the coming days, with ongoing updates to follow. Users are reminded to remain vigilant against impersonation accounts and malicious links, trusting only information released via official channels, and avoiding clicking on unsolicited or unverified links or engaging with them.
