Who caused the crypto market’s biggest liquidations on October 10? Insiders blame each other

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.

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.

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.

Starr later rebutted his critics, saying the series of events actually strengthened his argument rather than weakening it.

He said that Bitcoin began to decline about 30 minutes before USDe showed pressure, confirming that the initial trigger was a broader market shock. Star believes that without the leverage cycle building around USDe, the sell-off may stabilize. Instead, embedded leverage turns routine pullbacks into cascading liquidation events that are self-reinforcing.

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.”

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.