OKX CEO Star Xu mentioned the October 10 crash was not an accident however was the results of high-risk yield campaigns tied to USDe that normalized hidden leverage, pushing again after Binance launched a report attributing the turbulence to macroeconomic shocks and market-structure points.
In a press release issued on Friday, Xu argued that the incident, which triggered over $19 billion in liquidations inside 24 hours and affected 1.6 million merchants, “was brought on by irresponsible advertising and marketing campaigns by sure firms.”
“We noticed clearly that the crypto market’s microstructure basically modified after that day,” Xu said. “Many {industry} contributors imagine the harm was extra extreme than the FTX collapse.”
In accordance with Xu, systemic danger had constructed up quietly throughout platforms earlier than being uncovered by market volatility.
He mentioned the foundation of the issue was user-acquisition campaigns that promoted double-digit yields on USDe whereas permitting it for use as collateral and handled with the identical danger assumptions as USDT and USDC.
“USDe is basically completely different from merchandise resembling BlackRock BUIDL and Franklin Templeton BENJI, that are tokenized cash market funds with low-risk profiles. USDe, against this, embeds hedge-fund-level danger,” Xu famous.
In follow, USDe traded as if it had been interchangeable with stablecoins regardless of a materially increased danger profile, the OKX CEO said, including that this inspired leverage loops through which customers repeatedly swapped USDT and USDC into USDe, borrowed towards it, and recycled the proceeds to chase yield, pushing headline APYs from 24% to greater than 70%.
When market volatility rose on October 10, Xu mentioned even a comparatively small market shock was sufficient to set off a fast breakdown. USDe depegged, liquidations cascaded throughout venues, and weaknesses in danger administration round different belongings resembling WETH and BNSOL amplified losses, with some tokens briefly buying and selling close to zero.
He mentioned the influence on international customers and corporations, together with OKX clients, was extreme and restoration would take time.
“I’m discussing the foundation trigger, not assigning blame or launching an assault on Binance. Talking brazenly about systemic dangers is usually uncomfortable, however it’s obligatory if the {industry} is to mature responsibly,” Xu defined, stating that Binance bears an outsized accountability for market stability.
The crash occurred amid heightened volatility following Donald Trump’s announcement of a 100% tariff on Chinese language imports. Excessive leverage throughout centralized exchanges compounded the promoting strain.
ARK Make investments CEO Cathie Wooden mentioned on ‘The Claman Countdown’ this month that the severity of the crash was linked to a software program glitch at Binance, calling it an “aftershock” of prior market instability.
Xu beforehand pointed to an “industry-leading firm” as a main offender, accusing the trade of manipulating low-quality tokens in methods he in contrast them to Ponzi schemes. He claimed that such practices had eroded belief throughout the crypto {industry}.
In its report, Binance mentioned the crypto crash was triggered by macroeconomic shocks, elevated leverage throughout the market, market makers pulling liquidity underneath excessive volatility, and Ethereum’s community congestion.
Binance mentioned its methods stayed operational throughout the selloff, with minor points occurring after most liquidations. The trade has compensated affected customers and improved safeguards after the occasion.
