According to Guy Young, founder of Ethena Labs, the depegging of the USDe synthetic dollar on the Binance crypto exchange was due to an internal oracle issue, rather than problems with the underlying collateral, the Ethena protocol, or the token itself.
Young stated that USDe minting and redeeming functions operated “perfectly” during Friday’s flash crash; a total of $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 claimed.
During the crash, the price of USDe plummeted from about $1 to $0.65 on Binance because the exchange relied on its own orderbook’s oracle data, which had thinner liquidity, rather than utilizing an external price feed, Young explained. He added:
“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 did not allow market makers to close the loop.”
“No one would have been liquidated on any money market with oracles referencing the deepest pools of liquidity for USDe globally,” he stated.
Friday’s market crash triggered the largest 24-hour liquidation event in crypto history, causing a cascade that wiped out $20 billion in open leveraged positions, which some traders suggest could merely be the tip of the iceberg regarding financial damage.
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Traders speculate that the USDe depeg was a coordinated attack
Crypto trader ElonTrades speculated that the USDe depegging event on Binance was a coordinated attack that leveraged the “Unified Account” feature on Binance, which allows users to use assets like USDe as collateral.
This feature relies on Binance’s own orderbook data rather than external price oracles, which ElonTrades referred to as a “major vulnerability,” an issue the exchange announced it would rectify by October 14 by switching to external oracle data.
Taking advantage of this time frame, the attackers dumped up to $90 million of USDe on Binance, driving its price down to $0.65 on the exchange and triggering a wave of liquidations on the platform amounting to almost $1 billion.
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 by US President Donald Trump triggered panic among traders and caused a crypto market meltdown.
ElonTrades speculated that the attackers netted around $192 million in profit from their short positions, as the fallout from the Binance exploit spread across crypto markets, leading to about $20 billion in liquidations tied to a $100 million position.
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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