On April 10, Morpho Labs released a front-end update for its Morpho Blue application. A day later, a hacker exploited a vulnerability in the update, stealing $2.6 million worth of crypto assets. PeckShield, a blockchain security firm, identified the breach and reported that the hacker’s actions were front-run by the white hat MEV actor “c0ffeebabe.eth.” This known operator intercepted the stolen funds before they could be fully exploited, transferring them to another address.
In response to the incident, Morpho Labs rolled back the update to address the vulnerability. The team assured users that all funds within the protocol were safe and confirmed that normal operations had resumed. Further investigations revealed that the update, aimed at improving transaction flow, contained miscrafted transactions on the front-end. Morpho Labs applied a fix and promised a more detailed explanation of the incident in the following week.
The breach sparked significant market reactions, including a drop in the price of MorphoBlue’s native token, MORPH. The token lost 8.2% of its value within 30 minutes of the exploit being reported. This was followed by increased volatility across other DeFi tokens such as AAVE and COMP. In addition to price movements, trading activity surged, with MORPH trading volume rising by 150% in the hour following the breach. This event brought attention to security vulnerabilities in decentralized finance protocols.
Technical indicators revealed a bearish outlook for the MORPH token after the exploit. The Relative Strength Index (RSI) dropped to 32, signaling an oversold condition. Additionally, the Moving Average Convergence Divergence (MACD) showed a bearish crossover. Increased volatility was also evident, with wider Bollinger Bands signaling potential price swings. The incident highlighted the fragility of DeFi protocols and the critical need for improved security measures to prevent similar exploits in the future.
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