Nearly four months after the cryptocurrency’s record-breaking flash crash on October 10 wiped out leveraged positions across the market, the industry is still debating what exactly happened.
The argument turned into a public debate on Saturday after OKX founder and CEO Xing Xu claimed that the crash was neither complex nor accidental, but the result of irresponsible yield activity that pushed traders into a leverage cycle they didn’t understand.
President Trump’s escalation of new tariffs on China on October 10 roiled macro markets and hit cryptocurrencies at the worst possible moment. As leverage had piled up, the initial decline turned into a total liquidation of approximately $19.16 billion, including approximately $16 billion in long bets, as forced selling occurred across venues.
The core point of Star is USDe, the revenue token issued by Ethena. He described USDe as a hedge fund strategy closer to tokenization than a regular stablecoin. It is designed to generate earnings through trading and hedging strategies and then return the earnings to holders.
“It’s not complicated, and it’s not an accident. 10/10 was caused by the irresponsible marketing activities of some companies. On October 10, tens of billions of dollars were liquidated. As the CEO of OKX, we clearly observed that the microstructure of the cryptocurrency market changed fundamentally after that day. Many industry insiders believed that the losses were worse than the FTX crash. Since then, there has been extensive discussion about why it happened and how to prevent it from happening again. The root cause is not difficult to find.” Xu said.
Star believes that the risk begins when traders are forced to treat USDe like cash. In his account, users are encouraged to exchange stablecoins for USDe to obtain attractive yields, then borrow more stablecoins using USDe as collateral, exchange them for USDe again, and then repeat the cycle. This cycle creates a machine that automatically feeds leverage, making yields appear safer than they actually are.
“Binance users are encouraged to exchange USDT and USDC for USDe in order to obtain attractive yields without adequately emphasizing the potential risks,” he said. “From a user’s perspective, trading with USDe may appear to be no different than trading with traditional stablecoins, but the actual risk profile is much higher.”
This structure doesn’t require a big trigger to unwind when volatility hits, Star said. He claimed that this series of events turned the sell-off into a complete collapse and caused lasting damage to the exchange and users.
“Bitcoin started falling about 30 minutes before USDe decoupled. This just supports the previous view that the initial move was a market shock. Without the USDe leverage cycle, the market may have stabilized by then. Cascading liquidations are not inevitable – as explained before, they are amplified by structural leverage,” he said.
Others in the market pushed back on Star’s tweet.
Dragonfly partner Haseeb Qureshi called Star’s story “ridiculous” and said it attempted to shoehorn a clean villain into an event that didn’t fit a simple narrative. He believes that the crash did not spread immediately like a typical stablecoin explosion.
If the failure of one coin really drives the day, he said, the stress will be felt broadly and simultaneously across venues.
“USDe price diverged only on Binance and not on other venues,” he said. “But spirals of liquidation are happening everywhere. So if the dollar’s ‘decoupling’ isn’t propagated throughout the market, there’s no way to explain how ‘every exchange’ is experiencing huge losses.”
With all due respect, this story is ridiculous.
Star is trying to claim that the root cause of the 10/10 was that Binance launched an Ethena yield campaign that caused USDe to become over-leveraged due to traders cycling on Binance and eventually unraveled due to one small trade… https://t.co/IXlqLZI3DN pic.twitter.com/7YX529JAjN
— Hasseeb ＞|＜ (@hosseeb) January 31, 2026
Qureshi’s alternative explanation is that the macro news simply spooked already leveraged markets. As liquidity quickly receded, liquidation began.
Once the cycle begins, he says, it becomes a reflex. Forced selling causes prices to fall, which triggers more forced selling, with few natural buyers willing to step in during the chaos.
Earlier in the day, Binance attributed the October 10 flash crash to a collision of macro-driven selling with high leverage and disappearing liquidity, and rejected claims that the core trading system failed, CoinDesk reported.
