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Unwind a Morpho Vault V1

This guide explains how to safely wind down a Morpho Vault V1, ensuring depositors can withdraw their funds while removing market exposure and preventing new capital from entering.

Step 1: Prevent New Deposits

Set the supply cap to 0 for every active market in the vault. Since this is a cap decrease, it takes effect instantly without waiting for a timelock.

The preferred way to do this is via the Curator App: navigate to the Caps tab, set each market cap to 0, and submit. See the Curating Supply Caps tutorial for a step-by-step walkthrough.

Once all market caps are 0, the vault's supply queue no longer has any market to deposit into, and any incoming deposit will revert. Depositors can still withdraw freely.

Step 2: Remove Market Exposure

The Allocator moves assets from each active market to the vault's idle market (zero-yield position).

The preferred way to do this is via the Curator App: navigate to the Allocation tab, set all active markets to 0 and direct the full amount to idle, then submit. See the Managing Allocations tutorial for a detailed walkthrough including the "max catcher" best practice.

If a market is illiquid (high utilization), this step must be repeated incrementally as liquidity becomes available. Set up monitoring to track when funds can be withdrawn and an automation to automatically reallocate assets to idle.

Step 3: Reduce Yield to Zero

Once all funds are in the idle market, the vault yields 0%. This is the natural outcome of completing Steps 1–2. No additional action is required to suppress yield.

Optional: For listed vaults

If your vault is listed on the Morpho app, reach out to the Morpho Association to coordinate the off-chain wind-down:

  • Display a deprecation warning on the vault's page in the app, informing depositors that the vault is being wound down.
  • Remove the vault from the main listing once deposits are blocked and the wind-down is underway.
  • Notify users through the usual communication channels (governance forum, curator socials).