A Morpho Blue lending vault is facing an $18 million loss after a sharp collapse in the msY token left depositors unable to withdraw from a concentrated USDC (CRYPTO: $USDC) strategy.

The AlphaUSDC Delta V2 vault, curated by AlphaPing, had built heavy exposure to the msY/USDC market tied to Main St Finance’s msY token. The token fell as much as 85% on June 20, wiping out collateral value inside the market and pushing utilization to 100%.

In practice, that means all available liquidity has been borrowed, leaving depositors stuck while the market waits for repayment that may no longer be economically attractive for borrowers. The vault had been presented as a delta-neutral USDC strategy, but the collapse showed how quickly…