Binance has released findings from its internal investigation into the October 10, 2025 flash crash that wiped billions from the crypto market. The exchange credited over $328 million to affected users while facing sharp criticism from OKX CEO Star Xu, who blamed the chaos on reckless USDe marketing campaigns.
The October 10 crash sent shockwaves across global markets. Bitcoin futures and options open interest exceeded $100 billion before the selloff. U.S. equity markets lost roughly $1.5 trillion that day, with systemic liquidations reaching $150 billion. Crypto bore the brunt as leveraged positions unwound rapidly amid macro uncertainty tied to trade war headlines.
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Binance Pinpoints Two Technical Failures
Binance identified two incidents during the crash. The first occurred between 21:18-21:51 UTC when its internal asset-transfer subsystem slowed for 33 minutes. This affected fund movements between Spot, Earn, and Futures accounts. Some users saw balance displays drop to zero due to UI fallback issues, though no funds were actually lost.
The root cause stemmed from a performance regression on a database read path. Traffic surged 5-10x above normal levels, saturating database connections and causing timeouts. A prior cloud provider version upgrade had removed built-in query caching, reducing the system's capacity under extreme load.
The second incident involved index deviations for USDe, WBETH, and BNSOL between 21:36-22:15 UTC. Thin order book depth and Ethereum network congestion created a liquidity vacuum. Gas fees spiked from single digits to over 100 gwei, delaying arbitrage flows across platforms. Index calculations for these three tokens relied too heavily on Binance's own order books without sufficient anchoring to underlying reference values.
According to order book depth data from Kaiko, BTC liquidity was zero or near zero at every level on most exchanges during peak volatility. Only Binance, Crypto.com, and Kraken maintained bid orders within a 4% price spread. This thinning meant each additional forced sale moved prices more dramatically than usual.
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Binance confirmed that 75% of the day's liquidations occurred before the widely-reported depeg of USDe, BNSOL, and WBETH at 21:36 UTC. The highest-volatility window ran from 21:10-21:20 UTC, proving that most deleveraging happened during the initial macro shock starting at 20:50 UTC. This timeline shows the primary driver was market-wide risk-off sentiment and liquidation cascades, not platform-specific anomalies.
OKX CEO Blames USDe Yield Marketing
Star Xu, founder and CEO of OKX, offered a different perspective on X. He stated the crash resulted from irresponsible USDe marketing campaigns.
"10/10 was caused by irresponsible marketing campaigns by certain companies."
Xu explained that Binance launched a temporary user-acquisition campaign offering 12% APY on USDe while allowing it as collateral with the same treatment as USDT and USDC. USDe is a tokenized hedge fund product that embeds hedge-fund-level risk through index arbitrage and algorithmic trading strategies.
Users converted USDT and USDC into USDe to earn attractive yields without understanding the underlying risks. The situation escalated as users employed leverage loops: converting stablecoins into USDe, using USDe as collateral to borrow USDT, converting borrowed USDT back into USDe, and repeating the cycle. This created artificial APYs of 24%, 36%, and even 70%+, which many perceived as low-risk simply because a major platform offered them.
"Many industry participants believe the damage was more severe than the FTX collapse."
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When volatility hit, USDe depegged quickly. Cascading liquidations followed, amplified by weaknesses in risk management around assets like WBETH and BNSOL. Some tokens briefly traded near zero. The damage to global users and companies was severe.
Xu emphasized he was discussing root causes, not launching an attack on Binance. He noted that as the largest global platform, Binance has outsized influence and corresponding responsibility as an industry leader. Long-term trust in crypto cannot be built on short-term yield games or marketing practices that obscure risk.
Community Reaction and Compensation
Social media reaction was swift. One user on X sarcastically noted:
"Binance has investigated Binance and determined that Binance has done nothing wrong."
Binance launched the Together Initiative on October 14, a $300 million discretionary goodwill program for users impacted by the flash crash who didn't qualify for direct compensation. The exchange also created a $100 million low-interest loan fund for institutional participants severely affected by market conditions.
As of October 22, 2025, Binance fully compensated eligible users from both incidents, crediting over $328 million total. The exchange committed to tightening index methodology parameters and expanding database capacity to prevent future occurrences.
The crypto market's microstructure fundamentally changed after October 10. Exchange operators now face pressure to balance user acquisition with transparent risk disclosure, especially for complex yield products marketed to retail users.
3 Key Takeaways:
Binance paid $328M to users affected by October 10 technical failures during the historic flash crash event
OKX CEO Star Xu blamed USDe yield marketing for creating systemic risk through hidden leverage loops
The crash liquidated billions as extreme volatility triggered liquidity vacuums across major exchanges
#Binance #Liquidations #USDe #FlashCrash #CryptoMarket
This Article First Appeared on: https://www.cryptonewslive.org/article/binance-blames-macro-shock-for-october-10-flash-crash-as-okx-ceo-slams-risky-usde-campaign