Global, April 2025: A significant and explosive allegation has reignited debate over responsibility for one of last year’s most severe cryptocurrency market downturns. Xu Mingxing, the founder of the major global exchange OKX, has publicly and directly blamed rival Binance for the sharp crash that occurred on October 10, 2024. In a detailed social media post, Xu outlined a chain of events he claims originated from specific financial products and marketing strategies, culminating in tens of billions of dollars in forced liquidations. This accusation strikes at the heart of market structure and risk management practices within the digital asset industry, raising critical questions about leverage, stablecoin innovation, and systemic safety.
OKX Founder’s Direct Accusation Against Binance
Xu Mingxing, a respected and longstanding figure in the crypto industry known by his online pseudonym “Star,” did not mince words in his critique. His post on the platform X presented a cause-and-effect narrative centered on Binance’s handling of a particular stablecoin-like asset called USDe. Xu argued that the crash was not a random market correction but the direct result of what he termed an “irresponsible marketing campaign” by certain companies. He stated this campaign fundamentally damaged the crypto market’s microstructure—the underlying systems and mechanisms that facilitate trading and price discovery.
The core of his argument hinges on two specific actions by Binance. First, the exchange offered a remarkably high annual percentage yield (APY) of 12% for users who deposited USDe. Second, and more critically, Binance accepted USDe as collateral for margin trading and loans at a valuation ratio on par with established, fully-backed stablecoins like Tether’s USDT and Circle’s USDC. Xu contends that this combination created a powerful, and ultimately dangerous, financial incentive.
Understanding USDe and the Mechanics of the Alleged Crash
To grasp Xu’s allegation, one must understand what USDe is and how it differs from traditional stablecoins. Created by Ethena Labs, USDe is a “synthetic dollar” or “Internet Bond.” Unlike USDT or USDC, which are backed by cash and cash-equivalent reserves in bank accounts, USDe maintains its peg through a complex delta-neutral hedging strategy. It involves taking a long position on Ethereum (ETH) spot and a corresponding short position on ETH perpetual futures contracts. The yield is generated from the funding rates paid in the perpetual swaps market.
Xu Mingxing explicitly stated he considers USDe to be more akin to a “tokenized hedge fund product” than a traditional stablecoin due to this inherent dependency on market mechanisms and derivative strategies for both its yield and stability. His criticism focuses on Binance treating this instrument with the same risk profile as cash-equivalent stablecoins. The alleged sequence of events is as follows:
- High-Yield Attraction: Binance’s 12% APY offer for USDe deposits attracted massive capital from users seeking returns far above traditional finance or even standard crypto savings products.
- Collateral Feedback Loop: Users could deposit USDe, borrow more liquid stablecoins like USDT against it, convert that USDT back to USDe to earn the yield again, and re-deposit to borrow more. This created a highly leveraged cycle.
- Rapid Risk Accumulation: This practice, known as “recollateralizing” or “leveraging up,” exponentially increased the amount of USDe used as collateral within the Binance ecosystem and the broader connected DeFi landscape.
- The Breaking Point: On October 10, 2024, the cryptocurrency market experienced significant volatility. The hedging mechanism behind USDe came under stress, causing the asset to temporarily lose its 1:1 peg to the US dollar.
- Cascade of Liquidations: Because USDe was widely used as collateral at high loan-to-value ratios, its de-peg triggered automatic, forced liquidations of the positions it backed. This selling pressure exacerbated market declines, leading to more liquidations in a destructive cascade. Xu claims this process wiped out “tens of billions of dollars” in value.
Contextualizing the October 10 Market Event
Historical data from October 10, 2024, confirms a severe market contraction. The total cryptocurrency market capitalization fell by over 8% in a 24-hour period, with Bitcoin (BTC) and Ethereum (ETH) leading the decline. Funding rates across perpetual swap markets turned deeply negative, indicating extreme pressure from leveraged long positions being unwound. On-chain data analytics firms reported some of the highest volumes of liquidations seen in 2024 on that day, concentrated on long positions. While market sentiment was already fragile due to macroeconomic concerns, the scale and speed of the drop aligned with a major deleveraging event, as described by Xu.
The episode highlighted a perennial vulnerability in crypto markets: the interconnectedness of leverage. Exchanges, lending protocols, and derivative platforms are often linked through shared collateral assets. When a key asset like a major stablecoin or, in this case, a stablecoin-adjacent product like USDe experiences instability, the shockwave propagates rapidly across the entire system.
Broader Implications for Crypto Market Structure
Xu Mingxing’s public statement goes beyond a simple blame game. It touches on several unresolved structural issues within the cryptocurrency industry:
- Collateral Quality and Risk Assessment: How should exchanges and DeFi protocols classify and risk-weight new financial instruments? Treating a algorithmically-dependent synthetic asset with the same haircut as a regulated, cash-backed stablecoin represents a significant risk management decision.
- The Pursuit of Yield: The relentless demand for high yield in a low-interest-rate traditional environment pushes users and platforms toward increasingly complex and risky products. Marketing such yields can create unsustainable demand and concentrated risk.
- Transparency and Communication: Xu anticipates “a significant amount of false information and organized FUD” targeting OKX in response to his criticism. This points to a tense, competitive environment where public discourse about systemic risk can be met with retaliatory narratives, muddying the waters for ordinary investors.
- Regulatory Attention: Events like the October 10 crash provide concrete case studies for financial regulators worldwide. They underscore arguments for stricter oversight of crypto leverage, collateral practices, and the marketing of high-yield products to retail investors.
Industry analysts have noted that while Ethena’s USDe protocol itself performed its hedging mechanics as designed during the volatility, the centralization of its use as collateral on a single major exchange created a systemic single point of failure. This contrasts with the decentralized ethos of the product itself.
The Role of Major Exchanges in Systemic Stability
As the largest centralized liquidity hubs, exchanges like Binance and OKX wield enormous influence over market dynamics. Their decisions on which assets to list, what yields to offer, and what collateral to accept directly shape user behavior and risk concentrations. This incident raises the question of whether these platforms have a de facto responsibility for maintaining systemic stability, akin to the role of major banks in traditional finance. Xu Mingxing’s statement is, in part, a call for more conservative and prudent practices from industry leaders, even if it means forgoing short-term competitive advantages in user attraction.
Conclusion
The allegation by OKX founder Xu Mingxing that Binance’s practices precipitated the October 10 crypto crash is a serious claim that frames the event as a preventable failure of risk management rather than an inevitable market fluctuation. His detailed explanation focusing on USDe’s high yield and collateral status provides a specific technical narrative for the billions in forced liquidations witnessed. Regardless of the ongoing debate around motive or competitive dynamics, the core issues highlighted—collateral quality, leverage cycles, and the systemic impact of major platform decisions—are undeniably critical for the future health of the cryptocurrency market. As the industry matures, transparent discussion of these structural risks, as Xu advocates, will be essential for building a more resilient financial ecosystem. The October 10 crypto crash serves as a stark reminder that innovation must be paired with rigorous risk assessment.
FAQs
Q1: What exactly is USDe and how is it different from USDT or USDC?
USDe is a “synthetic dollar” created by Ethena Labs. Unlike USDT and USDC, which are backed by traditional cash and cash-equivalent reserves held in banks, USDe maintains its peg through a delta-neutral hedging strategy involving Ethereum spot and futures positions. Its yield comes from funding rates in derivatives markets, making its stability and returns dependent on market mechanics.
Q2: Why does Xu Mingxing blame Binance specifically for the crash?
Xu’s allegation centers on two Binance actions: offering a very high 12% APY on USDe deposits, and, more importantly, accepting USDe as collateral for loans at the same valuation as fully-backed stablecoins. He argues this created a dangerous incentive for users to build highly leveraged positions, which unwound catastrophically when USDe briefly lost its peg during market volatility.
Q3: What does “damaging the market’s microstructure” mean?
Market microstructure refers to the underlying processes, rules, and systems that govern how trades are executed, priced, and settled. Xu claims that by encouraging excessive, concentrated leverage using a novel asset as core collateral, Binance’s actions weakened the foundational stability of the trading ecosystem, making it prone to cascading failures.
Q4: Has Binance publicly responded to these allegations?
As of the time of this writing, Binance has not issued an official, detailed public response specifically addressing Xu Mingxing’s technical claims about USDe collateral and the October 10 event. The exchange typically emphasizes its risk management frameworks and user protection measures in general statements.
Q5: What are the potential long-term consequences of this event for the crypto industry?
The event is likely to intensify scrutiny on several fronts: how exchanges classify and risk-weight new crypto assets, the marketing of high-yield products, the systemic risks of interconnected leverage, and the potential need for more transparent industry-wide standards on collateral and risk disclosure. It may also influence regulatory approaches to stablecoins and synthetic assets.
