Introduction

altitude.fi uses Morpho vaults as part of our investment strategy. These vaults benefit all altitude users by actively managing debt positions, ensuring capital efficiency, and potentially reducing borrowing costs. We currently engage the Morpho Gauntlet Core USDC vault, and plan to expand offerings to include the Resolv USDC vault in the near future. 

This report is a deep dive into altitude’s relationship with Morpho and its vaults, providing detailed transparency into how your deposit earns you yield.

Morpho

Morpho’s Vaults allow lenders to deposit into specialized smart contracts with customized risk tolerances. These vaults route liquidity into various permissionless markets created on the core Morpho protocol. 

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Vault creators can programmatically define rules for how funds are allocated across lending markets, helping lenders optimize returns while managing exposure. Borrowers teract directly with the markets, receiving liquidity without needing to consider the underlying vault structures. 

This architecture promotes transparency, modularity, and user-driven customization in decentralized lending. Morpho’s documentation is an excellent resource for detailed explanations on how the protocol and all of its components function.

Gauntlet USDC Core Vault

The Gauntlet USDC Core Vault is one of Morpho’s flagship vaults. Curated by Gauntlet Networks, a leading DeFi risk management firm, this vault accepts USD Coin (USDC) deposits and allocates them across a whitelist of high-yield lending markets with slightly higher risk, to maximize earnings.

Vault Composition

Gauntlet supplies USDC across multiple isolated lending markets utilizing both blue-chip and select smaller-cap collaterals, while enforcing limits per asset to manage risk. 

As of Q1 2025, the vault’s allocation is spread roughly as follows:

• ETH Staking Derivatives (LSDs): A substantial portion of the vault is lent to borrowers posting high-liquidity ETH derivatives as collateral.
• Selective Small-Cap Collaterals: To enhance yield, Gauntlet USDC Core also whitelists a few smaller or newer collateral assets in controlled proportions. By diversifying into such assets (in moderation), the vault captures extra interest spread from borrowers in those markets.
• Stablecoin and RWA-Backed Assets: More recently, Gauntlet has introduced stablecoin-related markets to the Core vault. Notably, Resolv’s USR – an ETH-collateralized USD-pegged stablecoin – was added, comprising about one-third of the vault allocation (≈32% as of early 2025)​.

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In practice, the vault’s USDC may be distributed into 5–10 active markets at any time, each with a curator-set supply cap. Gauntlet actively manages the composition balance to ensure yield is diversified to protect the vault.

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Resolv USDC Vault

The Resolv USDC Vault whitelists Resolv-related markets on Morpho and allocates USDC across them. Gauntlet applies the same risk-adjusted optimization approach applied to its Core vault by monitoring Resolv collateral health and adjusting exposure.

​The Resolv Vault strategy is, expectedly, heavily weighted toward Resolv-native assets.

• Resolv Stablecoin (USR): A significant portion of the vault's allocation is directed towards borrowers utilizing Resolv's USR, an ETH-collateralized USD-pegged stablecoin. 
• Resolv Liquidity Provider Tokens (RLP): To enhance yield, the vault includes allocations to markets where borrowers provide Resolv Liquidity Provider (RLP) tokens as collateral. This strategy allows the vault to capture additional interest spreads from borrowers seeking to leverage their RLP holdings. ​
• Wrapped Staked USR Tokens (wstUSR): The vault also engages with borrowers who post wrapped staked USR tokens (wstUSR) as collateral. This inclusion aims to boost returns by tapping into the staking mechanisms associated with wstUSR, thereby earning interest from borrowers leveraging these assets. ​

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The Resolv USDC Vault offers exposure to a novel stablecoin yield and is capturing the upside of new expansion (via high borrowing demand and rewards) while mitigating risk through overcollateralization and expert curation. The risks are higher than pure blue-chip lending, but returns do historically outperform.

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Risk Profile

The Morpho Gauntlet Core USDC and Resolv USDC Vaults both operate with curated strategies designed to optimize yield, but each carries specific risk dimensions that users should understand.

Shared Risks Across Both Vaults:

• Smart Contract Risk: All Morpho vaults rely on complex smart contracts. While audits reduce vulnerabilities, risk of bugs or exploits cannot be entirely eliminated.
  
  
• Oracle/Price Feed Risk: Vault collateral values depend on accurate price feeds. Manipulation or failure of oracles could lead to under-collateralization.
  
  
• Market Liquidity Risk: Some whitelisted collateral assets may experience slippage or illiquidity during stress events, increasing the risk of impaired liquidations.
  
  
• Protocol Risk: Morpho, Resolv, and associated stablecoin issuers remain emerging protocols. Upgrades or governance decisions could introduce unexpected changes.

Gauntlet Core USDC Vault-Specific Risks:

• Higher LTV Exposure: Yield enhancement strategies that include smaller assets increase sensitivity to sudden market shocks or liquidity exits.
  
  
• Small-Cap Collateral: Yield enhancement strategies that include smaller assets increase sensitivity to sudden market shocks or liquidity exits.
  
  

Resolv USDC Vault-Specific Risks:

• Ecosystem Concentration: The vault is heavily exposed to Resolv-native assets (USR, RLP, wstUSR). A systemic issue with the Resolv protocol would directly impact the vault.
  
  
• New Asset Risk: Assets like wstUSR are novel, and their market behavior under stress remains largely untested.
  
  
• Reward-Driven Demand: Borrowing demand may be temporarily inflated by incentive programs. When those taper off, yields and vault utilization could decline.
  
  

Both vaults aim to mitigate these risks through active curation, overcollateralization, and diversified exposure, but they are not risk-free. We continually monitor vault health metrics, market conditions, and governance developments to ensure proactive risk management.

Conclusion

Gauntlet’s strategies via Morpho’s vaults offer capital efficiency advantages with varying risk-adjusted returns. The diversified approach we’ve chosen balances high-liquidity assets with selective risk to deliver the most stable, risk-weighted yield to altitude users.

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