The USDe synthetic dollar depegged on the Binance crypto exchange due to an internal oracle issue, not because of the underlying collateral, the Ethena protocol, or the token itself, according to Guy Young, founder of Ethena Labs, which created USDe.
USDe minting and redeeming operated “perfectly” during the flash crash on Friday, Young claimed; $2 billion in USDe was redeemed within 24 hours across crypto exchanges like Curve, Fluid, and Uniswap, with minimal price deviations of 30 basis points (BPS) or less, he noted.
The price of USDe dropped from around $1 to $0.65 on Binance during the crash because the exchange utilized internal orderbook oracle data, which had thinner liquidity, instead of an external price feed, Young stated. He further remarked:
“The severe price discrepancy was confined to a single venue, which relied on the oracle index from its own orderbook, not from the deepest liquidity pool, and faced deposit and withdrawal issues during the event, preventing market makers from closing the loop.”
“No trader would have been liquidated on any money market using oracles that reference the deepest liquidity pools for USDe globally,” he said.
The market crash on Friday initiated the largest 24-hour liquidation event in crypto history, resulting in a cascade that erased $20 billion in open leveraged positions, with some traders claiming this could only represent the tip of the financial damage iceberg.
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Traders speculate whether USDe depeg was a coordinated attack
Crypto trader ElonTrades suggested that the depegging of USDe on Binance was a coordinated attack taking advantage of the “Unified Account” feature, allowing users to pledge assets like USDe as collateral.
This feature uses Binance’s internal orderbook data instead of external price oracles, which ElonTrades identified as a “major vulnerability” that the exchange planned to address by October 14 with a shift to data from external oracles.
Exploiting this period, attackers dumped up to $90 million of USDe on Binance, driving its price down to $0.65 on the exchange and triggering approximately $1 billion in liquidations on the platform.
Simultaneously, the attackers initiated 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 escalated trader panic and led to a market crash.
The attackers reportedly gained around $192 million from their short positions as the fallout from the Binance exploit rippled through crypto markets, liquidating approximately $20 billion from a $100 million position, according to ElonTrades.
The liquidation event prompted Kris Marszalek, CEO of the Crypto.com exchange, to call for an investigation into exchanges that faced significant losses.
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