In a recent upheaval within the cryptocurrency ecosystem, the stablecoin USDe experienced a sudden depegging event on the Binance exchange, falling from its dollar peg to as low as $0.65. Initially attributed to systemic issues or collateral problems, new insights suggest that the incident was primarily driven by an internal oracle mishap and possibly a targeted attack exploiting Binance’s platform features. This highlights ongoing concerns about blockchain protocol resilience and the security vulnerabilities within centralized crypto exchanges amid volatile market conditions.
- USDe’s peg collapsed temporarily on Binance due to an internal oracle issue, not the token’s collateral backing.
- The depegging was likely triggered by a coordinated attack exploiting Binance’s “Unified Account” feature.
- Over $2 billion worth of USDe was redeemed during the event, with minimal price deviation across other exchanges.
- The incident caused the largest 24-hour liquidation event in crypto history, wiping out approximately $20 billion in leveraged positions.
- Binance plans to fix the vulnerability by October 14, shifting to external oracles for price data.
Details of the USDe Depeg Event
The recent depegging of USDe on Binance was not directly linked to the stability of the collateral backing the stablecoin, according to Guy Young, founder of Ethena Labs. He clarified that the minting and redemption functions of USDe performed “perfectly” during Friday’s flash crash, which saw $2 billion in USDe redeemed across various crypto exchanges such as Curve, Fluid, and Uniswap. Despite the upheaval, price deviations remained minimal, suggesting systemic robustness outside Binance.
He explained that the price plunge on Binance was caused by the exchange’s reliance on its own orderbook data, which had thinner liquidity, instead of external price feeds. “The severe discrepancy was isolated to a single venue, referencing the oracle index on its own orderbook, not the deepest pools of liquidity,” Young remarked. Importantly, this did not lead to liquidations in USDe globally, emphasizing that the issue was confined to a specific exchange platform.
“No one would have been liquidated on any money market with oracles referencing the deepest pools of liquidity for USDe globally,” Young added.
The sudden decline from $1 to $0.65 triggered widespread liquidations, with some traders speculating that the event was a targeted, coordinated attack. This theory is supported by reports that attackers exploited Binance’s “Unified Account” feature, which temporarily used internal orderbook data instead of external oracles—an acknowledged vulnerability that Binance has committed to fixing by October 14.
According to traders, the attackers reportedly dumped up to $90 million worth of USDe onto Binance, driving its price down and sparking a cascade of liquidations estimated at around $1 billion. Simultaneously, the same actors opened short positions on Bitcoin and Ethereum on the Hyperliquid decentralized exchange, just before the U.S. tariff announcement by President Trump, capitalizing on market panic and volatility.
The exploits resulted in approximately $192 million in profits for the attackers, compounding broader market turmoil that saw an estimated $20 billion liquidated in a matter of hours, underscoring the fragility of crypto markets during flash crashes.
This incident prompted industry leaders, including Kris Marszalek, CEO of Crypto.com, to advocate for greater oversight and investigations into exchange vulnerabilities that contributed to such massive liquidation events.
