Morpho co-founder Merlin Egalite has clarified that the recent liquidity shortages in some of the platform's vaults are not indicative of a systemic flaw but are a natural response to market stress. Egalite explained that during periods of market stress, lenders tend to withdraw funds simultaneously, leading to increased capital utilization and decreased liquidity. This situation can result in temporary liquidity shortages, but it is a controlled and localized issue. Egalite emphasized that Morpho's interest rate model is designed to automatically adjust borrowing rates to restore balance. For instance, when capital utilization spikes to 100%, borrowing rates increase significantly, encouraging a return to a balanced state. He noted that only a small fraction of Morpho's 320 vaults experienced temporary liquidity shortages, while the majority continued to operate normally. Egalite reassured that these shortages do not imply losses or bad debts, but rather a short-term lending of funds, with the market adjusting in real time to find a new equilibrium.