The synthetic dollar USDe deindexed on crypto exchange Binance due to an internal oracle issue and not because of the underlying collateral, the Ethena protocol or the token itself, according to Guy Young, the founder of Ethena Labs, the creator of USDe.
USDe minting and redemption worked “perfectly” for Friday’s flash crashhe affirmed; $2 billion in USDe was traded in 24 hours on crypto exchanges including Curve, Fluid and Uniswap, with minimal price spreads of 30 basis points (BPS) or less, Young said.
The price of USDe fell from about $1 to $0.65 on Binance during the crash because the exchange was using Oracle data from its own order book, which had thinner liquidity, rather than an external price feed, Young said. He added:
“The severe price divergence was limited to a single venue, which referenced the Oracle Index on its own order book, not the deepest liquidity pool, and faced deposit and withdrawal issues during the event, which did not allow market makers to close the loop.”
“No one would have been liquidated in a money market with oracles referring to the deepest liquidity pools for USDe in the world,” he said.
Friday’s stock market crash triggered the largest 24-hour liquidation event in crypto history, creating a cascade that wiped out $20 billion in leveraged open positions, which could only have amounted to tip of the iceberg in terms of financial damage, some traders say.
Related: The Bitcoin and Altcoin Market Liquidation Continues: What Was the Cause and When Will It End?
Traders wonder if USD deindexing was a coordinated attack
Crypto trader ElonTrades speculated that the USDe withdrawal event on Binance was a coordinated attack that exploited the “Unified Account” feature on Binance which allows users to post assets like USDe as collateral.
This feature uses Binance’s order book data instead of external price oracles, which ElonTrades described as a “major vulnerability” and an issue the exchange said it would fix by October 14 by relying on data from external oracles.
The attackers took advantage of this window of time, dumping up to $90 million worth of USDe on Binance, lowering its price to $0.65 on the exchange and unleashing a torrent of liquidations on the platform of up to $1 billion.
At the same time, the attackers opened short positions in Bitcoin (BTC) and ether (ETH) on the decentralized hyperliquid perpetual futures exchange, minutes before Friday’s tariff announcement by US President Donald Trump, which sent traders into complete panic and crypto markets into a meltdown.
The attackers then made around $192 million in profits on their short positions, as contagion from the Binance exploit spread across crypto markets, liquidating around $20 billion due to a $100 million position, ElonTrades speculated.
The liquidation event prompted Kris Marszalek, CEO of the Crypto.com exchange, to request an investigation exchanges that suffered significant losses.
Review: The real risks for Ethena’s stablecoin model (are not what you think)
