The October 11 crypto crash was one of the worst in the industry’s history. Liquidations exceeded $19 billion in 24 hours, and the capitalization of digital assets plummeted by almost $660 billion. The trigger for the shock sell-off was President Donald Trump’s announcement of 100% tariffs on Chinese goods, which sparked another wave of fear and panic among investors.
In addition to the organic correction triggered by macroeconomic factors, the market has faced significant infrastructure challenges, particularly from the largest exchange, Binance. Binance has acknowledged that during the collapse, the prices of several altcoins, including IoTeX, Cosmos, and Enjin, were displayed as near-zero due to an error in the exchange’s interface, despite their continued trading above these prices on other platforms. For example, the price of ATOM was estimated at $4 on most exchanges, but it dropped to $0.1 on Binance, leading to the immediate liquidation of many long positions with any leverage.
But some analysts believe that Binance’s contribution to the collapse of the crypto market over the weekend was bigger. According to one version, Binance evaluated collateral assets (USDE, wBETH, BnSOL) at its own spot price, and not according to external oracles. In a short period of time, this allowed the price of USDE on Binance to drop to $0.65 (whereas on other exchanges it continued to trade for $1). This destroyed the collateral’s marginal value, resulting in forced liquidations worth hundreds of millions of dollars.
This event coincided with Binance’s announcement of its transition to oracle-based pricing. However, there were still a few days before the update was implemented. During this time, an attack occurred, where malicious actors coordinated to sell approximately $60-90 million worth of USDE, causing a sharp decline and a chain reaction of margin calls and position liquidations, along with large short positions on Hyperliquid. This earned them about $192 million in profit. Thus, the vulnerability exploited in Binance’s margin account system exacerbated the volatility of the crypto market.
The exchange’s situation serves as an example of how a vulnerability, combined with strategic timing and external information, can lead to market crashes. Recognizing and mitigating such risks is crucial for all centralized exchanges and the DeFi sector.
