On January 31, 2026, OKX CEO Star Xu published a detailed statement directly accusing Binance of causing the October 10, 2025 liquidation event-the largest in cryptocurrency history, wiping out $19 billion in leveraged positions and affecting 1.6 million traders worldwide. His statement describes an irresponsible marketing campaign that offered 12% APY on USDe while treating it as equivalent to USDT and USDC for collateral purposes, despite USDe being a "tokenized hedge fund" with materially higher risk.
This is not speculation. This is the CEO of the world's second-largest crypto exchange publicly stating that Binance's product design and marketing practices directly caused systemic market failure. For anyone who lost money on October 10, or for anyone trying to understand why the crypto market fundamentally changed that day, this statement provides the most authoritative explanation to date.
Why This Topic Matters Now
October 10, 2025 was the day the crypto market broke. More than $19.1 billion in leveraged positions were liquidated in 24 hours-nine times larger than any previous single-day event. Bitcoin dropped from an all-time high of $126,000 on October 6 to $105,000. Ethereum fell 15%. Solana plunged over 40%. Some tokens briefly traded near zero.
Coin Metrics called it "The Great De-Leveraging." Industry insiders compared the damage to the FTX collapse. Yet for months, there was no clear consensus on what actually caused it. Trump's tariff announcement was the trigger, but why did this specific tariff announcement cause catastrophic failure when other macro shocks had not?
Star Xu's statement, posted just hours ago, provides the missing piece: Binance had systematically built a leverage bomb using USDe, and the tariff announcement simply lit the fuse. Understanding this event is essential for anyone operating in crypto markets in 2026, because the liquidity and market structure changes from October 10 are still affecting trading conditions today.
Core Explanation (Direct Answer Format)
The October 10 liquidation event was caused by Binance launching a user-acquisition campaign offering 12% APY on USDe (Ethena's synthetic dollar product) while simultaneously allowing USDe to be used as collateral with the same treatment as USDT and USDC, without effective limits. USDe is structurally a tokenized hedge fund that uses delta-neutral arbitrage strategies, not a fiat-backed stablecoin. Binance users converted USDT/USDC into USDe to earn yield, then used USDe as collateral to borrow USDT, converted that borrowed USDT back into USDe, and repeated this leverage loop to achieve artificial APYs of 24%, 36%, and even 70%+. When Trump announced 100% tariffs on China on October 10 at 4:50 PM EDT, volatility spiked, USDe depegged to $0.65 on Binance, and cascading liquidations across the entire crypto market wiped out $19 billion in 24 hours. According to Star Xu, "many industry participants believe the damage was more severe than the FTX collapse," and the market's microstructure fundamentally changed after that day.
The Timeline: How October 10 Unfolded
October 6, 2025: The Calm Before the Storm
Bitcoin reached an all-time high of $126,000. Altcoins were rallying. Leverage ratios across exchanges were elevated but not at alarming levels by crypto standards. The market appeared healthy.
October 10, 2025 - 4:50 PM EDT: The Trigger
Donald Trump announced 100% tariffs on Chinese imports and new export controls on software, effective November 1, 2025. This was in response to China restricting rare earth exports.
Within minutes, global markets began to react. Traditional finance saw immediate selling pressure. But crypto markets, which had survived previous macro shocks, began to collapse in a way that suggested something deeper was broken.
October 10-11, 2025: The Cascade
- Bitcoin: Dropped 10% to $105,000 (from ATH of $126,000 just four days earlier)
- Ethereum: Fell 15%
- Solana: Plunged over 40% at one point
- USDe on Binance: Depegged to $0.65 (a 35% loss on what users believed was a "stablecoin")
- Total liquidations: $19.1 billion across all exchanges in 24 hours
- Traders affected: Over 1.6 million
Some tokens briefly traded near zero. Risk management systems failed. WETH and BNSOL collateral issues amplified the crash. The market descended into panic.
October 11-Present: The Aftermath
Liquidity providers backed away. Order book depth collapsed. Even months later, the crypto market remains structurally different-more fragile, less liquid, more vulnerable to volatility. Traders describe it as "something broke in October."
What Star Xu Just Revealed: The USDe Leverage Bomb
The Marketing Campaign
According to Star Xu's statement posted today, Binance launched a temporary user-acquisition campaign with the following features:
- 12% APY on USDe deposits (significantly higher than USDT/USDC yields)
- USDe treated as equivalent to USDT/USDC for collateral (same haircut, same treatment)
- No effective limits on how much USDe could be used as collateral
- Marketing that downplayed risk ("without sufficient emphasis on the underlying risks")
The Critical Misrepresentation
Star Xu emphasizes that USDe is fundamentally different from traditional stablecoins:
"USDe is a tokenized hedge fund product. Ethena raises capital via a so-called 'stablecoin,' deploys it into index arbitrage and algorithmic trading strategies, and tokenizes the resulting fund."
He contrasts this with products like BlackRock BUIDL and Franklin Templeton BENJI, which are tokenized money market funds with low-risk profiles. USDe, by contrast, "embeds hedge-fund-level risk. This difference is structural, not cosmetic."
The Leverage Loop
Binance's campaign incentivized users to execute the following cycle:
- Convert USDT/USDC → USDe (to earn 12% APY)
- Use USDe as collateral to borrow USDT
- Convert borrowed USDT → USDe (earning another 12% APY on the borrowed funds)
- Repeat
With each cycle, users could stack yields:
- First cycle: 12% APY
- Second cycle: 24% APY (original + borrowed)
- Third cycle: 36% APY
- Advanced users: 70%+ APY
From the user's perspective, this appeared to be "low risk" because:
- It was offered by Binance, the world's largest exchange
- USDe was treated identically to USDT/USDC
- The yield was presented as stable and predictable
Star Xu states: "This leverage loop produced artificial APYs of 24%, 36%, and even 70%+, widely perceived as 'low risk' simply because they were offered by a major platform. Systemic risk accumulated rapidly across the global crypto market."
The Collapse
When Trump's tariff announcement hit, volatility spiked. USDe, being a delta-neutral hedge fund product rather than a fiat-backed stablecoin, responded to the volatility in its underlying positions.
On Binance, USDe depegged to $0.65 (a 35% drop). On decentralized platforms like Curve, it only dropped to $0.997. This discrepancy suggests Binance-specific liquidity or risk management issues amplified the depeg.
When USDe depegged on Binance:
- Users who had used USDe as collateral were suddenly undercollateralized
- Automated liquidations triggered
- Because so many users had built leverage loops, liquidations cascaded
- The selling pressure from liquidations caused further price drops
- More liquidations triggered
- The cycle repeated across the entire market
Star Xu describes the result: "Cascading liquidations followed, and weaknesses in risk management around assets such as WETH and BNSOL further amplified the crash. Some tokens briefly traded near zero. The damage to global users and companies-including OKX customers-was severe, and recovery will take time."
The Binance vs OKX Angle: Why Star Xu Is Speaking Now
This statement is extraordinary for several reasons:
1. Direct Accusation from a Competitor CEO
It is extremely rare for the CEO of one major exchange to publicly accuse another of causing systemic market failure. Star Xu is not making vague criticisms-he is directly stating that Binance's product design and marketing caused the October 10 event.
2. OKX's Performance During the Crash
Star Xu points out that OKX remained fully operational during the event:
- 1.72 million transactions per second processed
- 20 microsecond order latency maintained
- No forced liquidations beyond standard risk parameters
- Full functionality for deposits, withdrawals, and trading
This creates a stark contrast: OKX handled the volatility, while Binance's USDe mechanics allegedly amplified it.
3. Anticipating FUD Counterattacks
Star Xu explicitly states: "I expect there may be significant misinformation and coordinated FUD directed at OKX in the near future. Even so, speaking honestly about systemic risk is the right thing to do-and we will continue to do so."
This suggests he expects Binance to launch a PR counteroffensive, but he considers the issue important enough to speak publicly anyway.
4. Industry Responsibility Argument
Star Xu frames this as a question of leadership and responsibility:
"As the largest global platform, Binance has outsized influence-and corresponding responsibility-as an industry leader. Long-term trust in crypto cannot be built on short-term yield games, excessive leverage, or marketing practices that obscure risk."
He continues: "The industry needs leaders who prioritize market stability, transparency, and responsible innovation-not a winner-take-all mentality where criticism is treated as hostility."
What Actually Is USDe? The Tokenized Hedge Fund Debate
Ethena's Product Design
USDe is created by Ethena Labs as a "synthetic dollar" product. Here's how it works:
- Users deposit collateral (typically ETH or stablecoins)
- Ethena deploys that collateral into delta-neutral arbitrage strategies:
- Long spot positions in assets like ETH
- Offsetting short positions in perpetual futures
- The "basis trade" captures the funding rate differential
- Ethena tokenizes the resulting position as USDe
- USDe holders receive yield from the arbitrage strategies
This is fundamentally different from USDT or USDC, which hold fiat reserves in bank accounts or treasuries.
Why It's Not a "Stablecoin"
Star Xu argues that calling USDe a "stablecoin" is misleading:
- Fiat-backed stablecoins (USDT, USDC) maintain $1 peg through direct redemption mechanisms with fiat reserves
- USDe maintains value through arbitrage strategies that rely on market conditions
When market volatility disrupts those arbitrage strategies, USDe can lose its peg. That's not a "depeg" in the traditional sense-it's the expected behavior of a tokenized hedge fund during volatility.
Ethena's Response
After the October 10 event, Ethena emphasized:
- The protocol remained fully collateralized
- Over $2 billion in redemptions were processed in 24 hours without operational issues
- The drop to $0.65 only occurred on Binance; on DEXes like Curve, USDe only went to $0.997
- This was an exchange-specific issue, not a protocol failure
Binance later reimbursed users $283 million for losses related to the incident, which some interpret as an admission of fault.
The Classification Matters
If USDe is a stablecoin, then a drop to $0.65 is a catastrophic failure. If USDe is a tokenized hedge fund, then a drop to $0.65 during extreme volatility is an expected risk that should have been disclosed.
Star Xu's accusation is that Binance marketed USDe as if it were in the first category, while it was actually in the second.
Market Microstructure: What Changed Permanently
According to Star Xu: "The crypto market's microstructure fundamentally changed after that day."
Reduced Liquidity
After October 10, liquidity providers became more cautious. Order books thinned. The market became more vulnerable to large moves from smaller trades.
Deleveraging
Exchanges tightened risk parameters. Users became more conservative with leverage. The "easy yield" era ended abruptly.
Trust Erosion
The fact that a major exchange could offer a product that resulted in 35% losses on what users believed was a "stablecoin" damaged trust in centralized platforms' risk management.
Self-Custody Acceleration
The event reinforced the argument for self-custody solutions. If exchange-specific issues can cause a "stablecoin" to depeg to $0.65 while DEXes show $0.997, exchange custody introduces unique risks.
Common Mistakes or Myths
Myth 1: "October 10 was just another tariff-driven selloff"
Reality: The tariff announcement was the trigger, but the magnitude of the crash was driven by Binance's USDe leverage loop. Other tariff announcements have not caused $19B liquidation events.
Myth 2: "USDe failed as a stablecoin"
Reality: Star Xu argues USDe was never a true stablecoin-it's a tokenized hedge fund. Calling its price movement a "depeg" is like saying a stock "depegged" when it dropped. The issue is how it was marketed and used as collateral.
Myth 3: "This could happen to USDT or USDC"
Reality: USDT and USDC are backed by fiat reserves. While they have different risks (regulatory, centralization), they don't have the same delta-neutral arbitrage risk as USDe.
Myth 4: "All exchanges were equally affected"
Reality: Star Xu specifically states OKX maintained full functionality with 1.72M TPS and 20 microsecond latency. The USDe depeg to $0.65 was Binance-specific; DEXes showed $0.997.
Myth 5: "This is just Binance vs OKX corporate rivalry"
Reality: While there is certainly competitive tension, the factual claims are verifiable: Binance did offer 12% APY on USDe, did treat it as equivalent to USDT/USDC for collateral, and did see USDe trade at $0.65 while other platforms showed near-peg prices. The debate is about interpretation and responsibility, not fabricated events.
FAQ
Was the October 10 crash caused by Trump's tariff announcement or by Binance's USDe campaign?
Both. The tariff announcement was the volatility trigger, but according to Star Xu, Binance's USDe campaign created the systemic fragility that turned a normal volatility event into a $19B liquidation catastrophe. The tariff was the spark; the USDe leverage loop was the gasoline.
Did USDe actually "depeg" or is that terminology wrong?
Star Xu argues the terminology is wrong because USDe is a tokenized hedge fund, not a fiat-backed stablecoin. Hedge fund products fluctuate with market conditions-that's expected behavior, not a "depeg." The issue is whether users understood they were holding a hedge fund product vs. a stablecoin.
Why did USDe drop to $0.65 on Binance but only to $0.997 on Curve?
This suggests exchange-specific issues on Binance. Potential explanations include: (1) Binance-specific liquidation cascades, (2) risk management failures, (3) liquidity issues unique to Binance's order books, or (4) forced selling from margin calls specific to Binance's collateral treatment. Ethena's protocol remained fully collateralized and processed $2B in redemptions.
Did Binance reimburse users for losses?
Yes. Binance reimbursed over $283 million to users for losses related to the October 10 event. Some interpret this as an admission of fault; others see it as good customer service. Binance has not publicly commented on Star Xu's specific allegations.
Is it safe to use USDe now?
USDe can be used safely if you understand what it is: a tokenized hedge fund that derives yield from delta-neutral arbitrage strategies. It is not a fiat-backed stablecoin. During extreme volatility, it can lose its peg. Do not use it as collateral for high-leverage positions unless you understand and accept that risk.
What does this mean for Binance's reputation?
That depends on how Binance responds. If Star Xu's allegations go unanswered, it damages Binance's credibility on risk management. If Binance provides evidence that contradicts the allegations, it could restore trust. The $283M reimbursement suggests Binance acknowledges some level of responsibility, but no formal statement has addressed Star Xu's specific claims.
Will exchanges regulate yield campaigns differently now?
Likely. The October 10 event demonstrated that high-yield campaigns on complex products can create systemic risk. Expect exchanges to implement stricter risk parameters, better product classification, and clearer disclosure of what is a "stablecoin" vs. a "yield product."
Overview
The October 10, 2025 liquidation event was crypto's largest crash, wiping out $19 billion and affecting 1.6 million traders. For months, the industry debated what caused it. Today, OKX CEO Star Xu provided the clearest answer yet: Binance's marketing campaign offering 12% APY on USDe while treating it as equivalent to USDT/USDC for collateral purposes, despite USDe being a tokenized hedge fund with materially higher risk. Users created leverage loops reaching 70%+ APY, perceiving them as low-risk because they were offered by a major platform. When Trump's tariff announcement triggered volatility, USDe depegged to $0.65 on Binance (but only to $0.997 on DEXes), cascading liquidations followed, and the crypto market's microstructure fundamentally changed. Star Xu's statement is a direct accusation from one exchange CEO to another, framing the issue as industry responsibility and systemic risk rather than competitive rivalry. Whether this leads to regulatory changes, exchange policy reforms, or simply a public feud between Binance and OKX remains to be seen. What is clear is that the easy-yield era is over, and the market remains structurally different than it was before October 10.
Recommended Reading
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Sources
- OKX CEO Star Xu Warns October 2025 Crash Did 'Lasting Damage' - Yahoo Finance
- Something broke for crypto in October - CryptoSlate
Actionable takeaway: Understand the difference between fiat-backed stablecoins (USDT, USDC) and synthetic dollar products (USDe). High yields on complex products come with hidden risks, especially when used as collateral for leverage. Exchange-specific risk management failures can amplify systemic events-diversification across platforms and self-custody options reduce single-point-of-failure risk.
