The drop of the synthetic dollar USDe to $0.65 on the Binance exchange was not due to problems with the collateral or the Ethena protocol, but because of a failure of the internal Binance oracle. This was stated by Guy Young, founder of Ethena Labs — the company that issued USDe.
According to him, during Friday’s crash, the issuance and redemption mechanism of USDe worked “perfectly.” Over the course of a day, $2 billion was redeemed through Curve, Fluid, Uniswap and other DeFi platforms — with deviations from $1 not exceeding 30 basis points.
The problem, Young claims, was local and affected only Binance, which used data from its own order book, not from external oracles. At that time, liquidity on the exchange was limited, plus there were issues with deposits and withdrawals, which deprived market makers of the ability to balance the price.
“Such a sharp price gap arose solely because Binance relied on its own index, not the source with the highest liquidity. No liquidation would have occurred if oracles referred to the most liquid USDe pools across the market,” he explained.
Friday’s crash became the largest liquidation event in a single day in the entire history of the crypto market. The wave of sell-offs wiped out $20 billion in leveraged open positions — and, according to some traders, this may be just the tip of the iceberg in terms of actual damage.
Traders suspect a coordinated attack on USDe
According to a trader under the nickname ElonTrades, the sharp drop in USDe on Binance may be the result of a coordinated attack. He believes that attackers took advantage of the “Unified Account” feature, which allows the use of USDe as collateral.
The problem is that in this system, Binance relied on its own order book data, not external oracles. ElonTrades called this a “serious vulnerability.” Binance had already acknowledged the issue and promised to switch to external price sources by October 14.
Attackers took advantage of this window of opportunity and dumped up to $90 million in USDe on Binance. This crashed the token’s price to $0.65 and triggered a wave of liquidations totaling up to $1 billion.
USDe from Ethena lost its dollar peg and fell to $0.65 on Binance. Source: TradingView
At the same time, the attackers opened short positions on bitcoin and ether on the decentralized futures exchange Hyperliquid — literally a few minutes before Donald Trump announced new tariffs on Chinese imports. This news crashed the markets and caused panic among traders.
According to ElonTrades, as a result of the crash on Binance and timely opened shorts, the attackers earned about $192 million. It is believed that it was their actions that triggered a chain reaction across the market. In the end, almost $20 billion in positions were liquidated — although the initial attack was only for $100 million.
See also: “Uptober” didn’t work out — the crypto market crashed by $20 billion
Against the backdrop of this incident, the CEO of the exchange Crypto.com Kris Marszalek called for an investigation into the activities of the platforms where the largest losses were recorded.
