Crypto’s Oct Crash: The Great Leverage Blame Game

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Markets

What to know:

  • Four months have slouched by since crypto’s grand Oct. 10 flash crash, and the guild remains divided as sages debate whether the mischief sprang from the flaws of particular contraptions or from the general weather of the market-like a quarrelsome wind that rustles all the coins at once.
  • OKX’s chief, Star Xu, points a long finger at leverage loops spun around Ethena’s yield-bearing USDe, insisting that treating this token as cash converted a mere market tremor into a ridiculous cascade of liquidations.
  • Critics such as Dragonfly’s Haseeb Qureshi and Binance join the chorus, arguing the crash was primarily a macro-driven spectacle in a market already stretched to the seams, thinned liquidity, and mechanical liquidation engines-rather than the fault of a single token’s whimsy.

Nearly four months after crypto’s record Oct. 10 flash crash swept aside leveraged positions like so many cobwebbed bills, the market still argues about who, or what, actually broke the porcelain.

That argument erupted into a public skit this past Saturday when OKX’s founder, Star Xu, declared the crash no mystery at all, but a result of reckless yield campaigns that dragged traders into leverage loops they did not understand-a theatre of error dressed in marketing banners.

On Oct. 10, the macro world did its own impromptu kabuki-President Trump’s tariff escalations on China jostled the global stage just as traders were already wearing their leverage like a heavy coat. The initial fall became a wholesale eviction of positions, with roughly $19.16 billion liquidated, including about $16 billion from longs, as if some great oracle kept ringing a bell and the crowd could not resist running out the door.

No complexity. No accident.
10/10 was caused by irresponsible marketing campaigns by certain companies.

On October 10, tens of billions of dollars were liquidated. As CEO of OKX, we observed clearly that the crypto market’s microstructure fundamentally changed after that day.…

– Star (@star_okx) January 31, 2026

Star’s central argument circles around USDe, a yield-bearing token minted by Ethena. He calls it a hedge-fund masquerading as a simple stablecoin: a token meant to harvest yield through trading and hedging, then pass that harvest back to the holder.

He says the trouble began when traders were coaxed into treating USDe like cash. The sermon went thus: swap your stablecoins for USDe to reap juicy yields, then use USDe as collateral to borrow more stablecoins, convert those again into USDe, and so the spinning wheel goes-an ever-livelier loop that makes yields look as solid as a limestone reliquary.

When volatility intruded, Star claimed, that grand structure did not require a grand trigger to unwind. The cascade, he said, turned a routine swoop into a full-blown wipeout, and stitched damage across exchanges and users alike.

Later, Star pushed back on the chorus of critics, saying the sequence of events, rather than disproving, actually strengthens his argument.

Bitcoin began its fall about half an hour before USDe showed stress, he claimed, a sign that the initial shock was a macro animal, not a single token’s sudden sneeze. Without the leverage loops that crowded around USDe, he argued, the selloff might have found a stable corner to rest in. Instead, leverage, like a jealous cuckold, fed the fire and sent the flames licking from one exchange to another.

Others in the market did not bow to Star’s tale without comment.

Dragonfly partner Haseeb Qureshi called Star’s story “ridiculous,” suggesting it attempts to pin a single villain on a plot that simply doesn’t fit a neat fable. If a lone token truly toppled the day, he argued, the strain would have appeared in harmony across every venue.

“USDe price diverged ONLY on Binance; other venues did not follow suit,” he noted. “But the liquidation spiral was everywhere. So if the USDe ‘depeg’ did not propagate, it can’t explain why every exchange saw colossal wipeouts.”

With all respect to Star, this story is candidly ridiculous.

Star is trying to claim that the root cause of 10/10 was Binance creating an Ethena yield campaign, causing USDe to get overleveraged from traders looping it on Binance, which eventually unwound because of a small…

– Haseeb ＞|＜ (@hosseeb) January 31, 2026

Qureshi’s alternative tale is simpler and more melancholy: macro headlines startled an already-levered market. Liquidity vanished, and then fear, like a sly tavern-keeper, demanded another round of liquidations. Once such a cycle starts, it becomes a cruel, reflexive creature-lower prices beget more selling, looser buyers vanish, and chaos takes the pen from the authors of order.

Earlier in the day, Binance attributed the Oct. 10 flash crash to a macro-driven selloff colliding with heavy leverage and vanishing liquidity, rejecting claims of a core trading-system failure, as CoinDesk reported.

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2026-01-31 15:37