According to Guy Young, the founder of Ethena Labs, the USDe synthetic dollar’s depegging on the Binance crypto exchange was due to an internal oracle issue rather than the underlying collateral, Ethena protocol, or the token itself.
Young stated that USDe minting and redeeming functioned “perfectly” during Friday’s flash crash; $2 billion in USDe was redeemed across various crypto exchanges, including Curve, Fluid, and Uniswap, with minimal price deviations of 30 basis points (BPS) or less, as reported by Young said.
The price of USDe dropped from approximately $1 to $0.65 on Binance during the crash because the exchange utilized oracle data from its own orderbook, which had thinner liquidity, instead of an external price feed, according to Young. He added:
“The severe price discrepancy was contained to a single venue that referenced the oracle index on its own orderbook, not the deepest pool of liquidity, while also facing deposit and withdrawal issues that prevented market makers from closing the loop.”
“No one would have been liquidated on any money market utilizing oracles that reference the deepest pools of liquidity for USDe globally,” he noted.
The market crash on Friday triggered the largest 24-hour liquidation event in crypto history, resulting in a cascading effect that eradicated $20 billion in open leveraged positions, which some traders believe only represented a fraction of the overall financial damage.
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Traders speculate whether USDe depeg was a coordinated attack
Crypto trader ElonTrades speculated that the USDe depegging event on Binance was a coordinated attack that took advantage of the “Unified Account” feature on Binance, allowing users to post assets like USDe as collateral.
This feature relies on Binance’s own orderbook data instead of external price oracles, which ElonTrades labeled a “major vulnerability” that the exchange plans to rectify by October 14 by switching to external oracle data.
The attackers exploited this vulnerability, dumping up to $90 million of USDe on Binance, which drove its price down to $0.65 on the exchange and triggered a wave of liquidations amounting to up to $1 billion.
Simultaneously, the attackers opened short positions on Bitcoin (BTC) and Ether (ETH) on the Hyperliquid perpetual futures decentralized exchange, just moments before Friday’s tariff announcement from US President Donald Trump prompted traders to panic and led to a crypto market meltdown.
The attackers reportedly reaped approximately $192 million from their short positions, as the fallout from the Binance exploit permeated through crypto markets, liquidating around $20 billion triggered by a $100 million position, as speculated by ElonTrades.
The liquidation event prompted Kris Marszalek, CEO of Crypto.com, to call for an investigation into exchanges that suffered significant losses.
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