Nearly four months after crypto’s record flash crash on October 10 wiped out leveraged positions across the market, the industry is still debating what actually broke.
The debate turned into a public spat on Saturday after OKX founder and CEO Star Xu claimed on Saturday that the crash was neither complex nor accidental, but the result of an irresponsible yield campaign that forced traders into leverage loops they don’t understand.
On October 10th, President Trump’s new tariff hikes on China disrupted macro markets and hit cryptocurrencies at the worst possible time. In an already leveraged state, the initial decline was hit hard with about $19.16 billion in liquidations, including about $16 billion from long bets, as forced selling cascaded across the venue.
The core points of the star were: $USDea yield-bearing token issued by Ethena. He explained: $USDe It is more like a tokenized hedge fund strategy than a regular stablecoin. It is designed to generate yield through trading and hedging strategies and pass that yield on to its holders.
“There is no complexity. It is not an accident. 10/10 was caused by an irresponsible marketing campaign by certain companies. On October 10th, tens of billions of dollars were liquidated. As CEO of OKX, we believe that from that day forward, the microstructure of the crypto market has fundamentally changed. Many industry insiders believe that the damage was worse than the FTX collapse. Since then, there has been extensive discussion about why it happened and how to prevent it from happening again. “It is not difficult to identify the root cause.
Mr Starr claimed the risk began when the trader was recommended treatment. $USDe Like cash. According to him, users are using stablecoins as $USDe To get attractive yields, use: $USDe Convert them to stablecoins as collateral to borrow more stablecoins $USDe Repeat this cycle again. This loop has created a self-feeding leverage machine that makes yields look safer than they actually are.
“Binance users can exchange USDT and USDC. $USDe “They seek to obtain attractive yields without underemphasizing the potential risks,” he said. $USDe Although it looked no different than trading with traditional stablecoins, the actual risk profile was much higher. ”
Starr said that even with increased volatility, it doesn’t take a major catalyst for the structure to unwind. He argued that this chain of events turned the decline into a wipeout, leaving lasting damage to the exchange and users overall.
“BTC started falling about 30 minutes before the start. $USDe Depeg. This exactly confirms the earlier point that the initial move was a market shock. In case of absence $USDe If a leverage loop occurs, the market may be stable at that point. “Cascading liquidations were not inevitable, but were amplified by structural influences, as we have previously explained.”
Other market participants also reacted to Starr’s tweet.
Dragonfly partner Haseeb Qureshi called Starr’s story “ridiculous” and said it tried to impose a clean villain on events that don’t fit into a simple story. He argued that this crash did not unfold like a classic stablecoin explosion that spreads everywhere at once.
If one token failure really set the day in motion, he said, the stress would have been widespread and synchronized across the venue.
”$USDe “The only place where the price diverged was on Binance, not at other venues,” he said. “But liquidation spirals were happening everywhere. $USDe ‘depeg’ did not propagate throughout the market, so it cannot explain why there was a massive wipeout on *all exchanges*. ”
With all due respect to Starr, this story is frankly ridiculous.
Stars say the root cause of 10/10 is Binance creating Etena yield campaign, $USDe Trader loops on Binance and becomes overleveraged, ultimately unraveling with a small impact… https://t.co/IXlqLZI3DN pic.twitter.com/7YX529JAjN
— Haseeb＞|＜ (@hosseeb) January 31, 2026
Qureshi’s alternative explanation is that the macro headlines simply spooked an already leveraged market. Liquidation began as liquidity rapidly receded.
Once the cycle begins, he says, it becomes a reflex. Forced selling causes prices to fall, which in turn causes further forced selling, but few natural buyers are willing to step in during the turmoil.
As reported by CoinDesk, earlier in the day, Binance attributed the October 10 flash crash to a macro-driven decline that collided with high leverage and illiquidity, denying claims of a failure in its core trading system.
