Let's get straight to the point: Absolute caps control risk more directly than relative caps, but you definitely need both. The absolute cap is your final firewall; the relative cap tightens the channel before a fire spreads. Using just one is like locking only the front door while leaving the back door open.
To understand the difference, first look at how they're designed in Vault V2. Morpho Vault V2 introduces a cap system based on "risk IDs," where the curator can set both an absolute cap and a relative cap for the same risk factor.
Absolute cap: Sets a fixed asset amount ceiling for a market or collateral. For example, "Funds exposed to stETH collateral must never exceed 15 million USDC under any circumstances."
Relative cap: Limits exposure as a percentage of total vault assets. For instance, "Funds allocated to a certain type of market cannot exceed 20% of the vault's total assets."
Why Is the Absolute Cap "Harder"?
Because it doesn't depend on the vault's size—the number is fixed. When total assets grow quickly, a relative cap expands with them—if total assets double, the 20% available amount also doubles. An absolute cap, however, stays exactly the same. It is the hard brake before risk spirals out of control. In practice, raising either cap is a "risk increase" action; it is protected by a timelock, so a waiting period is required before it takes effect. In contrast, lowering a cap takes effect immediately, with no waiting period. This design already tells you: if an absolute cap is breached, the curator can pull it back right away.
What Makes Relative Caps Valuable?
They manage proportion. When total vault assets shrink, an absolute cap might still be very high, but the relative cap contracts with the vault, preventing a single market from taking up too large a share. In the Vault V2 implementation, the curator must submit proposals for both the absolute cap and the relative cap for each risk ID, and both must pass before they go live. This means the system by default requires curators to measure risk with two rulers—a hard amount and a soft percentage. One without the other simply won't be allowed.
Risk Reminder
According to KuCoin's analysis, the supply cap set by curators is meant to control the maximum vault capital exposed to a single collateral type, limiting losses if that asset fails. If you rely solely on relative caps, a larger vault means a larger single-market risk exposure. If you rely solely on absolute caps, a shrinking vault could quietly turn a market into a heavy concentration before the curator notices.
Step 1: Check Your Vault's Current Cap Settings
In the Morpho Curator App or on the Vault page, open the "Caps" tab. There you can see the absolute and relative caps configured for each market, each collateral type, and each adapter. If you find a risk ID with only one type of cap configured (for example, the absolute cap is set to unlimited), it means the curator only locked one door on that risk path.
Common Pitfall
Many depositors assume a supply cap is just a number, regardless of whether it's absolute or relative. But a relative cap is dynamic—the 20% limit you saw when you deposited might become 25% if the vault's total assets grow, while an absolute cap never moves. If you don't distinguish between the two, you might think you're exposed to 20% risk when it's actually already 25%.
Next Steps
Review your vault's cap settings, paying special attention to markets with "extremely low absolute caps"—those are the ones the curator is really nervous about. An absolute cap locks the maximum loss amount independently of the vault's total size, making it the most direct risk control metric. If a market has both a strict absolute cap and a strict relative cap, the curator is using a double-lock mechanism for that risk factor. If you discover a risk ID with an unlimited absolute cap, consider reducing your position or switching to a different vault.
