Approximately $8.84 million in XRP-backed loans on the Morpho lending protocol could be liquidated if collateral values decline by an additional 10%. Analysts have identified over 1,000 leveraged positions at risk after a sharp sell-off in the XRP market pushed the token to an 11-week low near $1.18.
Liquidation pressure grows on Morpho’s cbXRP market
Morpho, an onchain lending protocol enabling users to borrow stablecoins against crypto collateral, currently operates an XRP-backed market on Zksync’s Base network. Users in this market borrow the USDC stablecoin while pledging cbXRP, a Coinbase-wrapped version of XRP, as collateral.
Recent analysis examined lending positions recorded around 13:24 UTC on November 6. Researchers found that the market carried about 59.2 million USDC in outstanding loans, all backed by a total of 119.9 million cbXRP as collateral.
If oracle prices for cbXRP fall by another 10%, the liquidation risk threshold would be breached for loans accounting for $8.84 million in debt, roughly 15% of all borrowing on the platform. A smaller dip of 5% would still threaten 462 positions tied to $3.23 million in loans. Analysts note this is an overlapping group: the 462 positions are part of the wider set of 1,070 at risk if the price drops by 10%.
| Scenario | cbXRP Price Decline | Positions Exposed | Debt at Risk |
|---|---|---|---|
| Moderate | 5% | 462 | $3.23 million |
| Severe | 10% | 1,070 | $8.84 million |
Collateral management and liquidation process
Morpho’s cbXRP lending market issues liquidations at a loan-to-value (LTV) threshold of 62.5%. When a borrower’s outstanding loan crosses that percentage of their collateral’s value, the position becomes eligible for liquidation by third parties. For instance, a loan initially set at a 60% LTV would reach an estimated 66.7% LTV if the collateral fell by 10%, with the underlying debt and collateral constant, putting the loan above the safe threshold.
To avoid potential liquidations, borrowers may repay part of their debt or deposit more collateral to maintain a secure LTV ratio.
Analysis shows that nearly $8.84 million in loans could be liquidated if cbXRP prices fall by 10%, a scenario affecting more than 1,000 current borrowing positions on the Morpho platform.
Liquidation involves external participants repaying part or all of an at-risk loan, seizing part of the cbXRP collateral plus a liquidation bonus. However, the mere transfer of cbXRP within Morpho does not directly equate to an immediate sale of native XRP on the market.
Mini dictionary: Morpho is a decentralized onchain lending protocol that matches borrowers and lenders using smart contracts, enabling efficient, peer-to-peer credit markets on blockchain networks.
XRP-backed lending broadens across platforms
XRP’s double-digit pullback has pushed lending markets closer to risk thresholds. Coinbase, a major US-based crypto exchange, previously expanded its lending services by enabling eligible users to borrow stablecoins like USDC against their XRP holdings. The Morpho model meanwhile operates independently of the proposed native lending protocol on the XRP Ledger, which has yet to gain validator approval.
Industry observers note that the broader market for XRP-collateralized debt continues to expand. In one recent example, Coinpaper reported that a separate lending platform, Maple, counted $152 million in loans backed by 225 million XRP, although the lending terms and risk models differ.
Other projects such as Flare have also introduced XRP-backed borrowing, offering fresh options for users seeking liquidity without selling core assets. Ripple, the company behind XRP, has explored using the token as collateral for institutional credit—a move designed to unlock wider utility for XRP in traditional finance. Observers point out that such activity introduces new market dynamics and additional risks for leveraged borrowers.
Market participants caution that liquidation on DeFi platforms like Morpho does not directly translate to XRP being sold on exchanges, as liquidators may choose to retain or redistribute cbXRP outside public venues.
