The October 10-11 crypto crash, which saw over $19 billion in liquidations, was the biggest one in the history of the industry, and it came shortly after Bitcoin reached a new ATH above $126,000 on October 6, while Uptober was unfolding.
The events began with a Bitcoin selloff, and the crash continued with a Trump announcement regarding tariffs on China.
The critical moment was when around $60-$90 million worth of USDe was dumped on Binance, together with WBETH and BNSOL, exploiting a pricing flaw that valued collateral using the exchange’s own order book data instead of external oracles.
The localized depeg of the three tokens triggered between $500 million and $1 billion in forced liquidations, which led to more than $19 billion in crypto liquidations globally. Attackers earned approximately $192 million via $1.1 billion in BTC and ETH shorts opened on the Hyperliquid DEX minutes before the US President made the China tariff announcement.
The total crypto market cap was above $4.1 trillion before the crash began and dropped to approximately $3.3 trillion. The market began rebounding after Trump’s new statements.
Here’s how the Binance design flaw was involved in the events that triggered a huge amount of crypto liquidations.
Binance’s Design Flaw
The exchange’s Unified Account allowed traders to use USDe, WBETH, and BNSOL as collateral, and instead of using oracles or redemption prices, Binance valued the tokens using its own spot market, which was an important vulnerability.
However, it’s important to mention that on October 6, Binance announced a fix to move to oracle-based pricing, but the rollout was scheduled for October 14.
Binance Flaw Exploit
Sophisticated actors have manipulated Binance’s order books and dumped between $60 million and $90 million of USDe, triggering a USDe price drop to approximately $0.65 on Binance, while the price remained close to $1 on other exchanges.
The manipulation began at approximately 21:14 (UTC) on October 10.
The exchange’s Unified Account marked collateral to internal prices, leading to a wipeout of margin value and triggering $500 million to $1 billion in forced liquidations. After this, Trump’s announcement of China tariffs boosted the panic and liquidity stress, leading to a bigger crash.
Hyperliquid Involvement
Before the USDe, BNSOL, and WBETH depeg on Binance, new wallets on Hyperliquid opened $1.1 billion in BTC and ETH shorts, which were funded by $110 million USDC from Arbitrum-linked sources.
While the events on Binance were unfolding, BTC and ETH dropped, and the shorts gave $192 million in profit to exploiters.
The timing and funding paths suggested a coordination for the events that led to the biggest crypto crash in history.
Contagion of Other Exchanges
The Binance liquidations led to a sharp drop in prices for Bitcoin, which sank to $104,000 levels, and other digital assets. Other crypto exchanges mirrored the collapse via cross-market bots, and market makers were forced to unwind everywhere.
All these events resulted in more than $19 billion in global liquidations, with many altcoins dropping up to 70% intraday.
Root Causes of Events
After the initial Bitcoin sell-off before Trump’s announcement, another cause that supported the events was Binance’s design flaw and the exchange’s delay of the oracle rollout to October 14.
Exploiters executed and timed their manipulation, profiting via external shorts, while Ethena’s USDe remained 1:1 collateralized on all exchanges except Binance, as revealed by recent onchain analysis.
Binance’s Statements and Compensation for Users
On October 11, after Binance experienced issues with the platform due to a high volume of transactions and restored its services, it revealed an update on the USDe, BNSOL, and WBETH price depeg, providing data on its next steps, risk control enhancements, and user compensation.
The exchange identified the window of “abnormal pricing”: 21:36 (UTC) and 22:16 (UTC) on October 10, confirming an internal malfunction.
On October 12, the exchange announced that it had taken responsibility for the latest events and had fully covered users’ losses – the compensation had been distributed in two batches, totalling approximately $283 million.
Binance also revealed an upcoming compensation for internal transfers and earn product redemptions. The exchange stated that it was still reviewing and processing user cases, and it will continue to maintain full transparency for the community. It is also reportedly working to optimize its UI display and apply corrections for related abnormal prices.
Conclusion
The market crash began with Bitcoin being sold before any news, and the sell-off was supported by Trump’s China tariff announcement. Reports revealed that Coinbase transferred 1,066 BTC from its cold wallet to a hot wallet before the crash.
The events were not triggered by a stablecoin failure, but they were supported by an exploit in flawed collateral valuation during peak macro stress.
Bitcoin sell-off, the $90 million dump on Binance, and the $1.1 billion leveraged short via Hyperliquid triggered the $19 billion liquidations.
It’s important to highlight that Binance acknowledged the mistakes and is currently taking the necessary steps to prevent future disasters.
At the moment of writing this article, the crypto market is rebounding, and it’s the total crypto market cap is up by over 5.4% in the past 24 hours, with Bitcoin trading above $115,000, up by more than 3.5% today.
