According to Guy Young, founder of Ethena Labs, the USDe synthetic dollar’s depegging on the Binance crypto exchange was due to an internal oracle issue, not the collateral, the Ethena protocol, or the token itself.
Young stated that USDe minting and redeeming functioned “perfectly” during Friday’s flash crash, with $2 billion in USDe redeemed across crypto exchanges like Curve, Fluid, and Uniswap within 24 hours, showing minimal price deviations of 30 basis points (BPS) or less, he reported.
During the crash, the price of USDe dropped from around $1 to $0.65 on Binance because the exchange utilized oracle data from its own orderbook, which had lower liquidity, rather than an external price feed, Young explained. He remarked:
“The severe price discrepancy was isolated to a single venue, which referenced the oracle index on its own orderbook, not the deepest pool of liquidity, and was facing deposit and withdrawal issues during the event, which prevented market makers from closing the loop.”
“No one would have been liquidated on any money market with oracles referencing the deepest pools of liquidity for USDe globally,” he added.
The market crash on Friday instigated the largest 24-hour liquidation event in crypto history, resulting in a cascade that erased $20 billion in open leveraged positions, which some traders suggest could be just the start of the financial damage.
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Traders speculate if USDe depeg was a coordinated attack
Crypto trader ElonTrades speculated that the USDe depegging incident on Binance might have been a coordinated attack that exploited the “Unified Account” feature, allowing users to post assets like USDe as collateral.
This feature relies on Binance’s own orderbook data rather than external price oracles, which ElonTrades termed a “major vulnerability” and noted the exchange plans to rectify by October 14 by switching to external oracle data.
Attackers exploited this opportunity, dumping up to $90 million of USDe on Binance, driving its price down to $0.65 and initiating a wave of liquidations on the platform up to $1 billion.
Simultaneously, the attackers opened short positions on Bitcoin (BTC) and Ether (ETH) on the Hyperliquid perpetual futures decentralized exchange, just minutes before Friday’s tariff announcement from US President Donald Trump incited panic among traders and a crypto market collapse.
The attackers then netted around $192 million in profit from their short positions, as the fallout from the Binance exploit rippled through crypto markets, liquidating approximately $20 billion due to a $100 million position, ElonTrades speculated.
This liquidation event led Kris Marszalek, CEO of the Crypto.com exchange, to call for an investigation of exchanges that faced significant losses.
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