On rare occasions, you may not be able to withdraw your full balance from a Morpho Vault V1 or V2 immediately. This does not mean your funds are lost or that the vault has bad debt - it usually reflects temporary market conditions.

Below are the two main reasons this can happen and what they mean for you.

Applies to Morpho Vault V1 and V2.

Assets deposited on Morpho Vaults are not idle - they are deployed into underlying Morpho Markets to generate yield. When borrowers across those markets currently use most of the supplied liquidity (high utilization), there are simply not enough free assets sitting in the market for everyone to withdraw at the same time.

This is a normal, self-correcting state:

- The Variable Rate Markets interest rate model automatically adjusts: as utilization rises, borrow rates increase. Higher rates encourage borrowers to repay and attract new suppliers, which restores available liquidity. More on the Variable Rate Markets interest rate model in the documentation.
- You can typically withdraw a partial amount (whatever the vault has available right now) and come back later for the rest.

Applies to Morpho Vault V2 only.

In Morpho Vault V2, the curator allocates your deposits across multiple underlying markets to earn yield. Withdrawals are served from two designated sources:

the vault's idle liquidity (assets sitting directly in the vault contract) and the liquidity adapter (a specific underlying market designated by the curator as the primary withdrawal source).

When both run thin, the vault's own configuration is what restricts immediate liquidity.

This is Morpho Vault V2 specific and usually happens when:

- The vault's liquidity adapter points to a market that is itself illiquid or highly utilized. The liquidity market is the underlying market where vault's deposits are allocated and the source of vault's withdrawals liquidity.
- The curator has not (yet) routed enough idle liquidity from a market that has free assets right now.

Two safety nets exist for this case on Morpho Vault V2:

- In-kind redemption: If regular withdrawals aren't possible, you can convert your vault receipt token into direct supply positions in one or more of the underlying markets, ensuring you always have an exit path.

Note that this does not withdraw the deposited asset to your wallet, but shifts your exposure from the vault and all its underlying markets to your selected underlying markets. This flow is currently not supported on the Morpho app.
More about In-kind redemption in the documentation here.

- Forced deallocation: anyone can permissionlessly pull assets from a specific market back into the vault's idle balance, possibly paying a small penalty defined by the curator. See the Vault V2 liquidity section.

To make this smoother, the Morpho app automatically uses forced deallocation under the hood whenever the vault's setup allows it, so you usually don't have to think about it.

There are two levels where you can see a Morpho Vault V2 liquidity state in the vault page:

The Liquidity info shows the amount currently available to withdraw.
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Hovering over the Liquidity tooltip, you can access the breakdown of this available liquidity:
- Liquidity adapter
- Idle liquidity
- Deallocatable liquidity (Liquidity that can be permissionlessly moved from markets back to the vault's idle assets via forced deallocation)
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- Total underlying liquidity: a measure of markets depth - is the sum of the underlying liquidity across all the markets the vault is exposed to.

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Identifies the different markets the vault allocates to.
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Adding the additional information:
- Which one is the liquidity market (via the raindrop logo)
- The liquidity available for each market (liquidity column - does not mean it is available for the vault - it depends on the force deallocate feature availability).

No. A withdrawal delay or temporary liquidity shortage is not the same as bad debt:

- Bad debt = collateral value drops below the borrowed amount before liquidation, so some loans cannot be fully repaid.
- Liquidity crunch / withdrawal delay = funds are healthy and earning, they're simply lent out right now. These are uncommon situations driven by overall market movement, and they typically resolve quickly as rates rebalance and borrowers repay.

- Wait for utilization to ease. Higher rates incentivize borrowers to repay, or attract new depositors.
- Withdraw the partial amount currently available, and come back for the rest later.
- For Morpho Vault V2, if your vault meets the conditions, the Morpho app will already attempt a forced deallocation for you - no extra action needed. This is transparent for depositors - you won't even notice the liquidity market is short.

If any issue or additional question, get in touch opening the chatbox at the bottom right of the help page