In a stunning public accusation from Singapore on March 15, 2025, OKX founder Xu Mingxing has directly implicated rival exchange Binance for triggering last year’s severe October 10 cryptocurrency market crash. His detailed critique, posted on social media platform X, outlines a chain of events he claims exposed critical flaws in the digital asset ecosystem’s risk management, leading to tens of billions in liquidations. This revelation provides a crucial, experience-driven analysis of a pivotal moment that reshaped market perceptions of stability and collateral.
OKX Founder Details the October 10 Crypto Crash Mechanism
Xu Mingxing’s argument centers on specific financial products and their integration into trading systems. He asserts that the crash originated not from broad market sentiment, but from a precise structural vulnerability. According to his analysis, Binance offered a 12% annual percentage yield (APY) for deposits of the synthetic dollar stablecoin USDe. Furthermore, the platform accepted USDe as collateral for margin trading at a loan-to-value ratio equivalent to established stablecoins like USDT and USDC.
This combination, Xu contends, created a powerful and dangerous incentive loop. Traders could convert other stablecoins into USDe to earn high yield, then immediately use that same USDe as collateral to borrow more traditional stablecoins. They could then repeat the process, layering risk. Crucially, Xu differentiates USDe from centralized stablecoins, describing it as more akin to a “tokenized hedge fund product” due to its algorithmic backing mechanism. Treating it as risk-free collateral, he argues, was a fundamental error.
- High-Yield Incentive: Binance’s 12% APY on USDe attracted massive deposits.
- Collateral Misclassification: USDe was granted a 1:1 collateral value with centralized stablecoins.
- Recursive Leverage: Users could repeatedly leverage their position using the high-yield asset.
When market volatility spiked on October 10, the USDe price experienced a de-peg, falling below its intended $1.00 value. This de-pegging event automatically triggered margin calls and forced liquidations for every trader using USDe as over-leveraged collateral. Consequently, a cascade of selling pressure rippled across the market, amplifying the initial downturn into a full-scale crash. Market data from that day shows a correlation between USDe’s de-peg and sharp declines in major assets like Bitcoin and Ethereum.
Systemic Risk and Market Microstructure Damage
The core of Xu’s criticism extends beyond a single day’s price action. He emphasizes the long-term damage to the crypto market’s microstructure—the underlying systems and protocols that facilitate trading. By encouraging the treatment of a complex, yield-bearing derivative as risk-free cash, the practice fundamentally distorted risk assessment models across the industry. Risk managers and automated systems began pricing USDe collateral incorrectly, embedding instability into countless leveraged positions.
This event has since become a case study in decentralized finance (DeFi) and centralized finance (CeFi) interconnectedness. Experts from traditional finance, like Dr. Elena Torres of the Cambridge Digital Assets Programme, have noted that the crash highlights the “opacity of novel asset classification.” She states, “When exchanges assign collateral values, they act as de facto credit rating agencies. The October event shows the systemic consequences when those assessments fail to capture underlying asset volatility.”
Historical Context and Regulatory Implications
The October 10 crash did not occur in a vacuum. It followed a period of aggressive marketing for high-yield products across several platforms. Regulatory bodies, including the U.S. Securities and Exchange Commission and the Financial Stability Board, had previously issued warnings about the risks of algorithmic stablecoins and excessive leverage in crypto markets. The crash provided a tangible, costly example of those warnings materializing.
In the aftermath, several jurisdictions accelerated work on crypto market oversight frameworks. The event directly influenced discussions around the EU’s Markets in Crypto-Assets (MiCA) regulation provisions on stablecoin issuance and exchange collateral policies. Data from blockchain analytics firms shows a sustained reduction in the use of algorithmic stablecoins as primary collateral on major lending protocols since the crash, indicating a shift in market participant behavior.
Binance’s Role and the Broader Exchange Ecosystem
While Xu Mingxing’s comments focus on Binance, the incident raises questions about the entire cryptocurrency exchange landscape. Exchanges wield significant power in determining which assets are listed, how they are margined, and what yields are promoted. This role places a heavy burden of due diligence on their risk management teams. A comparative analysis of exchange policies from Q3 of last year shows varying approaches to synthetic assets.
For instance, some platforms capped the amount of algorithmic stablecoins that could be used as collateral, while others, like Binance at the time, offered parity with centralized counterparts. This divergence in policy created arbitrage opportunities but also concentrated risk. The table below summarizes key differences in collateral treatment pre-crash:
| Exchange | USDe Collateral Ratio | USDe Yield Offer | Max Leverage with USDe |
|---|---|---|---|
| Binance | 1:1 (Par with USDT) | 12% APY | 125x |
| OKX | Discounted (e.g., 0.8:1) | Not Offered | 10x |
| Other Major Platform A | Not Accepted | N/A | N/A |
Xu anticipates “a significant amount of false information and organized FUD” targeting OKX following his statements. This expectation points to the highly competitive and often contentious nature of the crypto exchange business. However, he maintains that speaking openly about such systemic risks is a necessary duty for industry leaders, arguing that transparency is essential for building a more resilient market infrastructure.
Conclusion
The October 10 crypto crash, as analyzed by OKX founder Xu Mingxing, serves as a critical lesson in financial engineering and risk management within digital asset markets. His direct blame on Binance for promoting high-yield USDe products as safe collateral underscores the profound impact exchange policies have on global market stability. This event has permanently altered conversations around leverage, stablecoin design, and the ethical responsibilities of trading platforms. Moving forward, the industry’s ability to learn from this crash—by improving collateral frameworks, enhancing transparency, and adopting more conservative risk models—will be paramount in preventing similar systemic failures and building sustainable growth for the cryptocurrency sector.
FAQs
Q1: What is USDe, and why was it controversial in this context?
USDe is an algorithmic synthetic dollar stablecoin. It was controversial because it was offered a high yield and treated as risk-free collateral for loans, despite having a different and potentially riskier backing mechanism than centralized stablecoins like USDT.
Q2: Did only Binance users experience liquidations on October 10?
No. While the initial trigger may have been concentrated on one platform, the cascade of selling affected the entire interconnected cryptocurrency market, causing liquidations for over-leveraged traders on multiple exchanges and in DeFi protocols.
Q3: How has the market changed since the October 10 crash?
Many exchanges have revised their collateral policies for algorithmic and synthetic assets, often applying haircuts or lower loan-to-value ratios. There is also increased scrutiny from regulators and a greater emphasis from institutional players on understanding the underlying mechanics of yield-bearing collateral.
Q4: What does “damage to market microstructure” mean?
It refers to harming the foundational systems, rules, and liquidity that allow markets to function smoothly. In this case, the mispricing of risk for a major collateral asset corrupted the lending and leverage systems that many traders depend on.
Q5: Has Binance publicly responded to these allegations from the OKX founder?
As of this writing, Binance has not issued a formal, detailed public response specifically addressing Xu Mingxing’s recent statements regarding the October 10 crash. The company typically focuses on its current risk management frameworks.
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