OKX Chief Executive Attributes October Bitcoin Collapse to Binance Yield Practices
The chief executive of OKX has publicly blamed rival exchange Binance for October's historic cryptocurrency market collapse, alleging that aggressive yield marketing pushed traders into unsustainable leverage positions.
Star Xu, who founded and leads OKX, stated over the weekend that the 10 October crash stemmed directly from what he characterised as reckless promotional campaigns surrounding USDe, a yield-generating token issued by Ethena. According to Xu, these campaigns encouraged users to treat the synthetic asset as equivalent to conventional stablecoins whilst obscuring material risk differences.
The 10 October event saw approximately $19.16 billion in liquidations across cryptocurrency markets, with long positions accounting for roughly $16 billion of that total. The selloff coincided with former President Trump's tariff announcements targeting China, which unsettled broader financial markets and triggered an initial downturn in digital asset prices.
Xu's central argument centres on the mechanics of USDe itself. Unlike straightforward stablecoins pegged to fiat currency reserves, USDe operates through derivatives hedging strategies designed to generate yield for holders. Xu contends that users were directed to convert established stablecoins such as USDT and USDC into USDe to capture attractive returns, then deploy USDe as collateral to borrow additional stablecoins, repeating the cycle to amplify yields.
This recursive borrowing pattern, according to the OKX executive, constructed a fragile leverage framework that concealed actual risk exposure from participants. When market volatility arrived, the structure unwound rapidly, transforming what might have been a contained selloff into a systemic liquidation event.
Xu argued that bitcoin prices began declining approximately 30 minutes before USDe lost its peg on certain platforms, suggesting the initial move represented a conventional market shock. He maintains that absent the leverage loop built around USDe, the market would likely have stabilised without cascading liquidations.
The OKX chief added that his exchange observed fundamental shifts in cryptocurrency market microstructure following the incident, with some industry participants comparing the damage to the 2022 FTX collapse.
However, several prominent figures have challenged Xu's account. Haseeb Qureshi, a partner at Dragonfly venture capital, dismissed the explanation as overly simplistic, noting that USDe price divergence appeared confined to Binance rather than propagating across all trading venues. If a single token failure truly drove the crash, Qureshi argued, stress indicators would have emerged simultaneously across the entire market.
Qureshi offered an alternative interpretation: macroeconomic headlines shocked an already overleveraged market, causing liquidity providers to withdraw rapidly. Forced selling then became self-reinforcing, with declining prices triggering additional liquidations whilst natural buyers remained scarce.
Binance itself attributed the flash crash to macro-driven selling pressure intersecting with excessive leverage and evaporating liquidity, denying that core trading infrastructure failures played a role.
The dispute intensified when Binance founder Changpeng Zhao suggested potential conflicts of interest, stating that Dragonfly had been amongst OKX's largest investors. Xu disputed this characterisation, clarifying that whilst OKX had invested in Dragonfly before Qureshi joined, Dragonfly itself never held an investment position in OKX.
Not all observers accept the single-cause explanations offered by either side. Seraphim Czecker, formerly head of growth at Ethena Labs, suggested the crash simply reflected overleveraged positions in alternative cryptocurrencies meeting a market lacking sustainable organic demand.
The October event remains the largest single-day liquidation episode in cryptocurrency market history. Disagreement over root causes points to ongoing uncertainty about leverage controls, collateral standards, and the appropriate regulatory treatment of synthetic yield products across digital asset platforms.
Industry impact and market implications
The public disagreement between major exchange executives highlights persistent questions about leverage management and collateral practices across cryptocurrency trading platforms. The scale of 10 October liquidations has prompted some exchanges to re-evaluate margin requirements and risk disclosures, particularly for synthetic assets that generate yield through derivatives strategies rather than direct backing.
The dispute also underscores regulatory ambiguity surrounding products like USDe, which combine stablecoin characteristics with active trading strategies. Jurisdictions continue to debate whether such instruments require disclosures similar to structured investment products or may be marketed alongside conventional stablecoins.
For platform operators, the incident demonstrates how interconnected leverage positions can amplify volatility across venues, even when initial stress appears localised. Some exchanges have since implemented tighter collateral haircuts for synthetic assets and adjusted liquidation protocols to reduce cascade risk during sharp market moves.
The disagreement over causation may influence how regulators approach position limits, collateral standards, and marketing requirements for yield-bearing digital assets. Industry participants expect continued scrutiny of leverage loops and recursive borrowing structures that can obscure actual risk exposure from retail users.
