Was Binance, the largest crypto exchange, responsible for the crash on October 10, 2025?

Many in the crypto industry remember: On October 10, 2025, crypto prices suddenly plummeted. Bitcoin fell hard from its high of more than $120,000, and since then, the prices of crypto assets have not recovered. Rather, unlike gold for example, they continue to decline steadily. But what really happened on October 10?

Almost four months after the devastating flash crash of October 10, 2024, in which approximately $19.16 billion was liquidated, a public controversy has erupted over the causes of the collapse. At the center of the debate are differing explanations from industry leaders about whether structural problems with individual products or broader market factors were responsible for the crash.

OKX CEO blames leverage loops

Star Xu, founder and CEO of crypto exchange OKX, attributed the crash to irresponsible marketing campaigns in a series of tweets on Saturday. Xu focused his criticism on USDe, a yield-bearing token from Ethena, which in his view was incorrectly treated like an ordinary stablecoin.

“No complexity. No accident. October 10 was caused by irresponsible marketing campaigns by certain companies,” Xu explained, adding that many industry participants believe the damage was more severe than the FTX collapse.

Xu argued that users were encouraged to exchange stablecoins for USDe to earn attractive yields, then use USDe as collateral to borrow more stablecoins, convert them back to USDe, and repeat the cycle. This leverage loop created a self-reinforcing leverage machine that made returns appear safer than they actually were.

Xu’s criticism was particularly directed at Binance. He claimed that Binance users were encouraged to convert USDT and USDC to USDe without the underlying risks being sufficiently emphasized.

Binance rejects allegations

Binance published a detailed report on Saturday in which the exchange attributed the flash crash to a macroeconomic shock that collided with high leverage and vanishing liquidity. The exchange rejected claims that a failure of its trading systems was responsible for the crash.

According to Binance, global markets were already under pressure after President Trump imposed new tariffs on China. Bitcoin and Ether had risen sharply in the months before early October, leaving traders heavily positioned and exposed. Open positions in Bitcoin futures and options exceeded $100 billion at that time.

Selling pressure reinforced itself, Binance said. As prices fell, market makers activated automated risk controls and reduced their exposure, withdrawing liquidity from order books. Data from Kaiko showed that liquidity on the bid side nearly disappeared during the peak of the movement on several major exchanges.

Two incidents on Binance acknowledged

Binance acknowledged two platform-specific incidents during the crash, but emphasized that neither caused the broader market movement:

• Between 21:18 and 21:51 UTC, there was a slowdown in the internal asset transfer system, which affected transfers between spot, earn, and futures accounts. Some users temporarily saw zero balances due to backend timeouts.
• Between 21:36 and 22:15 UTC, temporary index deviations occurred for USDe, WBETH, and BNSOL after most liquidations had already taken place. Binance attributed this to thin liquidity and delayed cross-venue rebalancing.

The exchange emphasized that approximately 75 percent of the day’s liquidations occurred before the index deviations, pointing to the initial macroeconomic shock as the primary driver. Overall, Binance compensated affected users with over $328 million.

Criticism of the single-actor theory

Haseeb Qureshi, partner at Dragonfly, called Xu’s account “ridiculous” and argued that it attempted to impose a clear villain on an event that did not fit a simple narrative. Qureshi pointed out that the USDe price only deviated on Binance, not on other trading venues, while the liquidation spiral occurred everywhere.

His alternative explanation is that macroeconomic headlines frightened an already heavily leveraged market. Liquidations began as liquidity quickly receded, triggering a reflexive cycle.

Other market participants also expressed doubt about the single-actor theory. Seraphim Czecker, former head of growth at Ethena Labs, wrote on X: “Markets collapsed because the industry held excessively leveraged altcoins and macro events revealed there was no sustainable organic demand for them.”

Personal tensions between executives

The debate also took a personal turn. CZ, former CEO of Binance, quoted Qureshi with the remark: “Dragonfly is/was one of the largest investors in OKX,” and added: “Data speaks. The timing doesn’t match.”

Star Xu rejected this characterization, explaining that Dragonfly was never an investor in OKX. OKX had invested in Dragonfly before Qureshi joined the firm, and an earlier fund of a partner, not Dragonfly, had invested in OKX.

The controversy illustrates that the crypto industry has still not reached consensus on the causes and lessons of the event, even months after the largest liquidation day in its history.