According to Ethena Labs founder Guy Young, the USDe synthetic dollar was depegged on the Binance cryptocurrency exchange due to internal oracle issues and not the underlying collateral, Ethena protocol, or the token itself.
USDe minting and redemption worked “perfectly” during Friday’s flash crash, he claimed. Young said $2 billion in USDe was redeemed within 24 hours across crypto exchanges including Curve, Fluid and Uniswap, with a minimum price change of less than 30 basis points (BPS).
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 illiquid order book rather than an external price feed. He added:
“The severe price differential was confined to a single venue that was referencing an oracle index on its own order book rather than the deepest liquidity pool, and faced deposit and withdrawal issues during the event, preventing market makers from closing the loop.”
“If there was an oracle that referred to USDe’s deepest liquidity pool around the world, no one would have been liquidated in any financial market,” he said.
Friday’s market crash triggered the largest 24-hour liquidation event in crypto history, setting off a chain reaction that wiped out $20 billion in open leveraged positions, but some traders say this is just the tip of the iceberg in terms of financial damage.
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Traders speculate whether USDE Depeg was a coordinated attack
Cryptocurrency trader ElonTrades speculates that the USDe unpegging event on Binance was a coordinated attack that exploited Binance’s “Unified Account” feature, which allows users to deposit assets such as USDe as collateral.
This feature uses Binance’s own order book data instead of external price oracles. ElonTrades describes this as a “critical vulnerability,” and it’s an issue the exchange announced it will fix by October 14th by pivoting to data from an external oracle.
The attackers took advantage of this time to dump up to $90 million in USDe on Binance, reducing the price on the exchange to $0.65 and triggering a wave of liquidations on the platform worth up to $1 billion.
At the same time, attackers opened short positions in Bitcoin (BTC) and Ether (ETH) on the HyperLiquid Perpetual Futures decentralized exchange minutes before President Donald Trump’s tariff announcement on Friday sent traders into full-blown panic and the crypto market into meltdown.
The Binance exploit subsequently infected the cryptocurrency market, with around $20 billion liquidated from $100 million positions, leading Elontrade to estimate that the attackers made around $192 million in profits from their short positions.
Following the liquidation incident, Crypto.com exchange CEO Chris Marszalek called for an investigation into the exchange, which suffered significant losses.
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