
Liquidity risk in DeFi is the danger that a token can't be bought or sold without severe price impact, or can't be exited at all, driven by onchain conditions like thin pools, unlocked LP tokens, and concentrated ownership that can change in a single transaction.

A technical comparison of Morpho Midnight and KPK's ETH Yield Term on Euler showing why fixed-rate DeFi lending does not define risk, and how immutable protocol design versus actively managed rate setting creates fundamentally different risk architectures for institutional allocators.