- OKX and Binance figureheads and supporters clashed on social media as an exposé pinned the latter because the offender for the deep liquidations in the course of the 10/10 flash crash.
Star Xu, Founder and CEO of OKX, has dropped a bombshell on the 10/10 (October 10) crypto flash crash final yr, as Bitcoin (BTC) and altcoins braced for multibillion-dollar liquidations this weekend. The exposé, pinning the blame once more on Binance, put the crypto alternate co-founded by Changpeng “CZ” Zhao on the defensive.
What OKX CEO Star Xu Uncovered
Star didn’t mince phrases in a post on Saturday. He fired up Crypto Twitter (CT) with allegations that the 10/10 occasion was the results of “irresponsible advertising campaigns by sure firms.” The OKX boss highlighted that it was no accident.
The USDe Issue
The lead of one of many world’s largest crypto exchanges revealed that it began when Binance launched a short lived user-acquisition marketing campaign with an attractive 12% annual proportion yield (APY) on Ethena’s USDe artificial stablecoin. It additionally allowed the token for use as collateral with out limitations, in the identical vein as Tether’s USDT and Circle’s USDC.
Not like common stablecoins like USDT and USDC, which preserve their 1:1 peg to the US greenback by means of money reserves or short-term Treasury securities, USDe employs delta hedging in crypto and futures markets to maintain its 1:1 peg. Its design technically makes it a tokenized hedge fund product, carrying the identical hedge fund-level danger.
Star alleged that Binance inspired its customers to transform their USDT and USDC into USDe with out explaining the inherent dangers of USDe. As a outcome, clients who had an impression that USDe was no totally different from the stated stablecoins took the bait of the upper yield.
What’s worse, some customers amplified the dangers by making a leverage loop after they used their transformed USDT or USDC as collateral to borrow USDT. Then, they cycled the borrowed tokens again to USDe, and so forth.
Poor Danger Administration Amplifying the Liquidations
By the point market volatility struck on 10/10, because the crypto market crashed as a result of US President Donald Trump’s aggressive tariffs on China, USDe depegged quickly. It uncovered Binance’s poor danger administration as the difficulty leaked to Wrapped Ethereum (WETH) and Binance Staked SOL (BNSOL). Star famous that some tokens even traded briefly at near-zero ranges within the speedy aftermath of the incident.
Star clarified that he was merely addressing the foundation reason for the difficulty and never pinning the blame on Binance. It’s to boost consciousness amongst members of the crypto group and to create measures to stop an occasion of such magnitude from occurring once more.
What Binance Mentioned
Binance instantly went on harm management as Star’s accounts on the 10/10 occasion fueled a debate throughout the crypto group. The world’s largest crypto alternate claimed the incident was primarily as a result of a macro shock that cascaded into a series of liquidations.
The corporate attributed the occasion to extremely leveraged positions, market makers’ danger controls thinning liquidity, and Ethereum (ETH) community congestion delaying transactions. Moreover, it identified that the issue was not crypto-specific since even the Nasdaq and S&P 500 bled with six-month-high single-day drops.
Some standard crypto personalities took Binance’s facet, and its former CEO, CZ, even resorted to pulling up Dragonfly Capital’s current social media submit to negate Star’s claims. The tweet in query had Haseeb Qureshi, Managing Accomplice at Dragonfly, calling Star’s statements “candidly ridiculous.” CZ emphasised that, regardless of being one in every of OKX’s largest buyers, Dragonfly understood the details.
Star Xu’s Rebuttal
With feelings seemingly operating excessive as the 2 heavyweights clashed, alongside their supporters, Star tried to quell the stress, saying he didn’t like debate, particularly from close-minded individuals. In the meantime, he acknowledged the details in CZ’s argument, however insisted on his prior factors.
The OKX CEO admitted that Bitcoin certainly started its dip half-hour earlier than the USDe depeg. Nevertheless, he firmly acknowledged that the USDe leverage loop, a structural leverage, prevented the market from instantly stabilizing after the BTC crash.
Alongside the best way, Star corrected CZ. He stated OKX invested in Dragonfly, not the opposite means round. It was additionally earlier than Qureshi joined the agency. Moreover, one associate’s earlier fund (not Dragonfly) invested in OKX.
Star refused to proceed the prolonged debate at that time.
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