USDe, the third largest stablecoin on the market, has lost parity with the dollar on Binance and was trading close to $0.65 on October 10th. Digital asset issuer Ethena Labs said the disparity did not affect the internal functioning of the protocol or its minting and redemption operations, suggesting that the blame lies with the world’s largest crypto exchange platform.
This event occurred between 21:36 and 22:16 UTC on Friday. It happened during the global cryptocurrency market crash.estimated at $190 million to $200 million in leveraged positions. Binance alone recorded over 1.4 billion liquidations in long positions and over 981 million in short positions.
In this context, the price of USDe fell by 35% on exchanges, while the deviation was less than 0.3% on decentralized platforms such as Curve, Fluid and Uniswap.
According to data from the company that operates USDe, the problem was localized. Most USDe trading takes place on decentralized exchanges. Liquidity of over $300 million. At Binance, liquidity was barely reaching tens of millions of dollars. This allowed for huge sales estimated at US$90 million to create a knock-on effect.
Additionally, positions using USDe as collateral will be automatically liquidated, Amplification of selling pressure And prices will fall even deeper.
The following graph is depeg USDe’s intraday price on Binance on October 10th and subsequent recovery included:
technological disruption in the market
Binance has admitted that there is a flaw in its system, which was overloaded by extreme trading volumes during Friday’s crash. This time frame allowed the system to collapse during market fluctuations. As a result, Binance compensated affected users $283 million.
Guy Young, founder of Ethena Labs, suggested that this episode was an isolated incident caused by Binance and not a global unbundling. He explained that because it was based on a unique oracle, “serious price differences were confined to a single location: that exchange.”. And it didn’t affect the most mobile groups.
According to Young, Binance “faced deposit and withdrawal issues during the USDe decline, and market makers were unable to close the loop.”
Haseeb Qureshi, Dragonfly’s managing partner, said what happened on Friday was ” flash crash In his opinion, it is unique to Binance. could have been avoided For a “better market structure”.
So remember that the main venue, USDe on the Curve platform, was actually trading at near parity throughout the day of the crash. “This is not at all what you would call secession,” he says.
The chart below shows the USDe price differential reflected on Binance, ByBit, and Curve during the market crash.
Oracle’s role
The technical root of this incident was Binance’s oracle system. The exchange used its own order book as the main source of prices within its unified account system.
In doing so, it ignored redemption prices provided by external sources and oracles such as Chainlink. Once the internal order book was empty, Oracle reported the price as $0.65. This enabled automatic liquidation of collateral linked to USDe.
As defined by CriptoNoticias Cryptopedia, oracles are services that provide real-world data to decentralized applications (dApps) and smart contracts. Oracles allow decentralized finance (DeFi) applications to access external information such as prices, events, and other data that does not exist directly on the cryptocurrency network.
“Binance has started liquidating positions it shouldn’t have because of poor execution in oracles,” Qureshi said. “A good payment mechanism will not work during a sudden drop. If you are not the primary venue for the asset, and Binance is not the primary venue for USDe, you should check the price of the primary venue,” he recommends.
“If you only look at your own order book, you end up over-liquidating. So Binance started liquidating USDe as if it were worth $0.80, causing a series of liquidations,” he said.
In fact, it was Ethena’s pricing methodology that prevented the impact from spreading. Omer Goldberg, founder of Chaos Labs, points out that US$4.5 billion of positions were saved on DeFi protocol Aave. Approximately $180 million in liquidation penalties And then the waterfall.
Operational hypothesis
On the other hand, independent analysts Signs of coordination among traders They would have exploited a vulnerability in Binance. Mass withdrawals of up to $90 million occurred after the exchange admitted there was a problem with Oracle and reported an update scheduled for October 14th.
Journalist and market analyst Colin Wu described the incident as a “planned attack.” Losses are estimated at $500 million to $1 billion. For replacement.
For financial analyst Carmelo Aleman, the problem is deeper. According to him, the collapse was the result of: Coordinated practices between exchanges and market makers.
“Exchanges and market makers are colluding to take money from people,” he told CriptoNoticias, adding that the market crash “is not a sign of something new, but rather something that has been happening for years.”
“And this was theft, not a market reaction.” While denying that the market essentially fell after President Donald Trump threatened to restart a trade war with China (which he later backtracked on), he lashed out: “They (market makers) are envisioning any scenario like President Trump’s announcement of crashing the market and robbing people.”
Similarly, he denied that whales and big investors caused the market crash and accumulated $20 billion in liquidations, saying, “When the whole ecosystem collapses at the same time, it’s not human coordination. They do it with artificial intelligence.”
From their perspective, “exchanges send tokens, market makers sell them en masse, and then dump them on the market. They don’t allow the price to rise.”
(Tag Translation) Binance
