According to Guy Youthful, founder of Ethena Labs, the creator of USDe, the USDe synthetic dollar was blocked on the Binance cryptocurrency exchange due to an internal Oracle issue, and not due to the underlying security, the Ethena protocol, or the token itself.
He claimed that USDe minting and buying worked “perfectly” during Friday’s flash crash; $2 billion in USDe was exchanged in 24 hours on cryptocurrency exchanges including Curve, Fluid and Uniswap, with minimum price deviations of 30 basis points (BPS) or less, Youthful he 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 order book, which had less liquidity, rather than an external price source, Youthful said. Added:
“The major price divergence involved one venue that referenced the Oracle Index on its own order book rather than the deepest liquidity pool, and it struggled with deposits and withdrawals during the event, which did not allow market makers to close the loop.”
“No one would get liquidated in any money market where the oracles pointed to the deepest pools of USDe liquidity in the world,” he said.
Friday’s market crash triggered the largest 24-hour liquidation in cryptocurrency history, creating a cascade that wiped out $20 billion in open leveraged positions in what may be just the tip of the iceberg in terms of financial damage, some traders say.
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Traders are speculating whether USDe Depeg was a coordinated attack
Cryptocurrency trader ElonTrades was speculated that the USDe depegging event on Binance was a coordinated attack that took advantage of Binance’s “Unified Account” feature, which allows users to place assets like USDe as collateral.
The feature uses data from Binance’s order book instead of third-party price oracles, which ElonTrades has described as a “major security vulnerability” and an issue that the exchange says it will fix by October 14 by switching to data from third-party oracles.
The attackers took advantage of this time window, dumping up to $90 million USDe on Binance, lowering its price on the exchange to $0.65 and starting an avalanche of liquidations of the platform worth up to $1 billion.
At the same time, attackers opened low positions in Bitcoin (BTC) and Ether (ETH) on the decentralized futures exchange Hyperliquid Perpetual Futures, minutes before US President Donald Trump’s Friday tariff announcement sent traders into a panic and sent cryptocurrency markets crashing.
The attackers then made about $192 million on their low positions as the contagion from the Binance exploit spread to cryptocurrency markets, wiping out about $20 billion from the $100 million position, ElonTrades speculates.
The liquidation event prompted Kris Marszalek, CEO of the Crypto.com exchange, to call for an investigation into exchanges that suffered huge losses.
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