Crypto exchange boss blames Ethena’s USDe for October Crash, while traders hit back

Markets Share Share this article Copy link X icon X (Twitter) LinkedIn Facebook Email Crypto exchange boss blames Ethena’s USDe for October Crash, while traders hit back Months after Oct. 10’s flash crash and liquidation cascade, a fresh spat has opened between exchange executives and market watchers over whether a leveraged yield loop, thin liquidity, or busted market plumbing did the real damage. By Shaurya Malwa Jan 31, 2026, 12:27 p.m. Make us preferred on Google What to know : Nearly four months after crypto’s record Oct. 10 flash crash, industry leaders are still divided over whether the wipeout was caused by structural flaws in specific products or by broader market stress. OKX CEO Star Xu blames the selloff’s severity on leverage loops built around Ethena’s yield-bearing USDe token, arguing that treating it like cash turned a market shock into a cascading liquidation spiral. Critics such as Dragonfly’s Haseeb Qureshi, along with Binance, contend that the crash was primarily a macro-driven event in an already overleveraged market, exacerbated by vanishing liquidity and mechanical liquidation engines rather than a single token’s failure. In this article ETH ETH $ 2,636.70 ◢ 3.70 % XRP XRP $ 1.6972 ◢ 3.80 % SOL SOL $ 115.56 ◢ 0.55 % Nearly four months after crypto’s record Oct. 10 flash crash wiped out leveraged positions across the market, the industry is still arguing about what actually broke. That argument turned into a public spat on Saturday after OKX founder and CEO Star Xu claimed the crash was neither complicated nor accidental, but the result of irresponsible yield campaigns that pushed traders into leverage loops they did not understand. STORY CONTINUES BELOW Don't miss another story. Subscribe to the Crypto Daybook Americas Newsletter today . See all newsletters Sign me up By signing up, you will receive emails about CoinDesk products and you agree to our terms & conditions and privacy policy . On Oct. 10, President Trump’s fresh tariff escalation on China rattled macro markets and hit crypto at the worst moment. With leverage already stacked, the initial drop turned into a wipeout with roughly $19.16 billion in liquidations, including about $16 billion from long bets, as forced selling cascaded across venues. 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.… pic.twitter.com/N1VlY4F7rt — Star (@star_okx) January 31, 2026 Star's core point was about USDe, a yield-bearing token issued by Ethena. He described USDe as closer to a tokenized hedge fund strategy than a plain stablecoin. It is designed to generate yield through trading and hedging strategies, then pass that yield back to holders. Star argued that the risk began when traders were nudged into treating USDe like cash. In his telling, users were encouraged to swap stablecoins into USDe for attractive yields, then use USDe as collateral to borrow more stablecoins, convert those into USDe again, and repeat the cycle. The loop created a self-feeding leverage machine that made yields look safer than they were. When volatility hit, Star said, that structure would not need a big trigger to unwind. He claimed the cascade helped turn a selloff into a wipeout and left lasting damage across exchanges and users. Star later pushed back on critics, saying the sequence of events actually reinforces his argument rather than undermining it. Bitcoin began falling roughly 30 minutes before USDe showed stress, he said, confirming the initial trigger was a broader market shock. Without the leverage loop built around USDe, Star argued, the selloff could have stabilized. Instead, embedded leverage turned a routine drawdown into a cascading liquidation event that fed on itself. Others in the market pushed back on Star's tweets. Dragonfly partner Haseeb Qureshi called Star’s story “ridiculous,” saying it tries to force a clean villain onto an event that does not fit a simple narrative. He argued the crash did not unfold like a classic stablecoin blowup that spreads everywhere at once. If a single token failure truly drove the day, he said, the stress would have shown up broadly and in sync across venues. "USDe price diverged ONLY on Binance, it did not diverge on other venues," he said. "But the liquidation spiral was happening everywhere. So if the USDe "depeg" did not propagate across the market, it can't explain how *every single exchange* saw huge 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… https://t.co/IXlqLZI3DN pic.twitter.com/7YX529JAjN — Haseeb ＞|＜ (@hosseeb) January 31, 2026 Qureshi’s alternative explanation is that macro headlines simply spooked an already levered market. Liquidations began as liquidity pulled back fast. Once that cycle starts, he said, it becomes reflexive. Forced selling drives lower prices, which triggers more forced selling, with few natural buyers willing to step in during chaos. 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 . In this article ETH ETH $ 2,636.70 ◢ 3.70 % XRP XRP $ 1.6972 ◢ 3.80 % SOL SOL $ 115.56 ◢ 0.55 %