Binance attributed the Oct. 10 flash crash to a macroeconomic shock colliding with heavy leverage and evaporating liquidity, rather than any failure in its trading systems following speculative chatter on social media.
In a report released on Saturday, the exchange said global markets were already under pressure following trade war headlines as crypto markets crashed. Bitcoin and Ethereum had rallied for months until early October, leaving traders heavily positioned and exposed.
At that time, open interest in bitcoin futures and options exceeded $100 billion, creating the conditions for forced deleveraging once prices began to fall, he said.
The sell-off quickly fed on itself. As prices fell, market makers activated automated risk controls and reduced exposure, drawing liquidity from order books. Data cited by Binance, sourced from Kaiko, showed that supply depth nearly disappeared on several major exchanges during the peak of the move. With fewer orders sitting, even small liquidations caused prices to drop sharply.
The disruption was not limited to cryptocurrencies. U.S. stock markets lost approximately $1.5 trillion that day, with the S&P 500 and Nasdaq posting their biggest one-day declines in six months. Binance said approximately $150 billion in systemic liquidations occurred across global markets.
Blockchain congestion added to the tension. Ethereum gas rates soared above 100 gwei at times, slowing transfers and limiting arbitrage between venues. As capital could not move quickly, price gaps widened and liquidity became even more fragmented.
Binance incidents that occurred
Binance acknowledged two platform-specific incidents during the crash, but said neither caused the broader market move.
The first involved a slowdown in its internal asset transfer system between 21:18 and 21:51 UTC, affecting transfers between spot, earnings and futures accounts. Core trading systems remained operational, but some users temporarily saw zero balances due to backend timeouts.
Binance said the issue arose from a database performance regression under increased traffic and has since been fixed. The affected users were compensated.
The second incident involved temporary deviations of the USDe, WBETH and BNSOL indices between 21:36 and 22:15 UTC, after most liquidations had already occurred. Binance said low liquidity and delayed rebalancing between venues caused local price movements to disproportionately affect index calculations.
Since then, methodology changes were implemented and affected users were compensated.
Binance said that around 75% of the day’s liquidations occurred before the index deviations, pointing to the initial macro shock as the main driver.
In total, the exchange said it compensated users more than $328 million and launched additional support programs to stabilize participants affected by the crash.
