OKX Founder Blames Binance for Devastating October 10 Crypto Crash, Exposing Systemic Flaws

In a stunning public accusation that has sent shockwaves through the digital asset industry, OKX founder Xu Mingxing has directly blamed rival exchange Binance for the severe cryptocurrency market crash on October 10, 2024. The allegation, made from Singapore on March 15, 2025, centers on what Xu describes as irresponsible financial engineering that amplified systemic risk, leading to tens of billions in forced liquidations. This claim opens a critical debate about leverage, stablecoin innovation, and the fundamental microstructure of crypto markets.

OKX Founder Accuses Binance of Triggering Market Collapse

Xu Mingxing’s critique focuses on a specific product integration by Binance that he argues acted as a dangerous accelerant during a period of market stress. According to his detailed post on the social media platform X, Binance offered an unusually high annual percentage yield (APY) of 12% for deposits of USDe, a synthetic dollar protocol. Furthermore, and more critically, the exchange accepted USDe as collateral for loans at a loan-to-value (LTV) ratio equivalent to established stablecoins like USDT and USDC.

Financial analysts note this created a powerful, and potentially perilous, incentive loop. Users could deposit stablecoins, convert them to USDe to earn high yield, and then use that same USDe as collateral to borrow more stablecoins. This process, known as recursive leveraging, can exponentially increase both potential returns and systemic risk. When the underlying collateral’s value becomes unstable, the entire leveraged structure can unravel catastrophically.

The Mechanics of the October 10 Liquidation Cascade

The October 10 event was not a simple price correction but a complex liquidation cascade exacerbated by derivative market mechanics. Market data from that day shows a sharp increase in volatility, particularly affecting assets used as collateral in decentralized finance (DeFi) and centralized lending protocols. Xu contends that USDe, which he characterizes as being more akin to a “tokenized hedge fund” product than a pure stablecoin, experienced a de-peg from its intended $1.00 value during this volatility.

This de-peg triggered automatic margin calls and liquidations for positions where USDe was used as collateral. Because many users had employed the recursive strategy, a single de-peg event forced the sale of multiple asset layers. Consequently, these forced sales created downward price pressure on other crypto assets, leading to further liquidations in a self-reinforcing spiral. The table below outlines the key sequence of events as described by industry observers:

This episode highlights the fragile interdependence within crypto financial systems. A problem in one niche product can rapidly transmit risk to the broader market.

Expert Analysis on Stablecoin Design and Systemic Risk

Xu Mingxing’s central argument hinges on the fundamental nature of USDe. Unlike centralized stablecoins (USDT, USDC) backed by cash and cash equivalents, or decentralized algorithmic stablecoins, USDe employs a delta-neutral hedging strategy. It uses staked Ethereum (stETH) as backing and shorts Ethereum futures to maintain its peg. While innovative, this model carries inherent risks:

• Funding Rate Risk: The strategy can become unprofitable if futures funding rates turn negative for extended periods.
• Liquidity Risk: During market stress, executing the necessary hedges may become difficult or costly.
• Complexity Risk: The product’s mechanics are less transparent to the average user than a simple fiat-backed stablecoin.

Several independent researchers, including those from the Basel-based Bank for International Settlements (BIS), have previously warned about the systemic risks posed by complex crypto-assets being used as money-like instruments. Treating such an asset as risk-free collateral for loans, they argue, is a fundamental mispricing of risk that can lead to instability. Xu’s accusation aligns with this established financial principle, applying it to a specific real-world event.

Broader Context and the Aftermath of the Crash

The October 10 crash occurred during a period of regulatory scrutiny and shifting monetary policy. It served as a stark reminder of the cryptocurrency market’s vulnerability to leverage-induced shocks, echoing previous events like the Luna/Terra collapse in 2022. In the months following the crash, aggregate market leverage did decrease, and some exchanges revised their collateral policies for certain synthetic assets.

Xu Mingxing also made a pointed prediction in his statement, anticipating a wave of “false information and organized FUD” targeting OKX in retaliation for his criticism. This comment reflects the intensely competitive and often contentious nature of the crypto exchange landscape. However, he maintained that calling out observable systemic risks is a necessary duty for industry leaders, regardless of commercial rivalry. The incident has spurred renewed discussions among policymakers about:

• Appropriate risk disclosures for complex crypto products.
• Standardized collateral frameworks across exchanges.
• The need for more robust stress-testing mechanisms in DeFi and CeFi.

Conclusion

The allegation by OKX founder Xu Mingxing that Binance bears responsibility for the October 10 crypto crash underscores a pivotal moment for the digital asset industry. It moves the conversation beyond simple price movements to a technical examination of how product design, incentive structures, and risk management can combine to create systemic fragility. Whether one agrees with the specific assignment of blame, the event has undeniably highlighted critical vulnerabilities in the market’s microstructure. As the industry matures, integrating lessons from this October 10 crypto crash will be essential for building a more resilient financial ecosystem that can support sustainable growth and innovation.

FAQs

Q1: What exactly is USDe and how is it different from USDT or USDC?
USDe is a synthetic dollar protocol that uses a delta-neutral hedging strategy with staked Ethereum and futures contracts to maintain its peg. Unlike USDT or USDC, which are backed by traditional financial assets, USDe’s stability relies on the continuous execution of a complex financial strategy, introducing different risk profiles.

Q2: Why would accepting USDe as collateral cause a market crash?
Accepting it as high-quality collateral encouraged users to engage in “recursive leveraging.” They could repeatedly use it as loan collateral to borrow more, building a highly leveraged tower of debt. When USDe de-pegged, it triggered mass liquidations of these over-leveraged positions all at once, causing a fire sale of assets.

Q3: Has Binance publicly responded to these allegations from the OKX founder?
As of the latest updates in March 2025, Binance has not issued a formal, detailed public response specifically addressing Xu Mingxing’s claims regarding the October 10 event. The exchange typically focuses on its current risk management frameworks.

Q4: What is “recursive leveraging” in cryptocurrency?
Recursive leveraging is a process where a user uses an asset as collateral to borrow more of that same asset (or a similar one), then re-uses the borrowed amount as collateral again to borrow even more. This can exponentially increase exposure and potential gains, but also multiplies the risk of liquidation if the asset’s value falls.

Q5: What broader lesson should the crypto industry learn from the October 10 crash?
The primary lesson is that innovative financial products require proportional risk management. Treating complex, strategy-dependent assets with the same risk weight as simple, asset-backed instruments can create hidden systemic risks that amplify during market stress, leading to cascading failures.