Nearly four months after the record cryptocurrency flash crash on Oct. 10 wiped out leveraged positions across the market, the industry is still arguing over what really broke it.
That argument became a public dispute on Saturday after OKX founder and CEO Star Xu claimed that the crash was neither complicated nor accidental, but the result of irresponsible performance campaigns that pushed traders into leverage loops they didn’t understand.
On October 10, President Trump’s new tariff escalation on China shook macro markets and affected cryptocurrencies at the worst time. With leverage already built up, the initial decline turned into a wipeout with roughly $19.16 billion in liquidations, including about $16 billion of long bets, as forced selling cascaded across the board.
Star’s focus was on USDe, a yield token issued by Ethena. He described USDe as closer to a tokenized hedge fund strategy than a simple stablecoin. It is designed to generate yield through trading and hedging strategies and then return that yield to holders.
“No complexity. It’s not an accident. 10/10 was caused by irresponsible marketing campaigns by certain companies. On October 10, tens of billions of dollars were liquidated. As CEO of OKX, we clearly observed that the microstructure of the crypto market fundamentally changed after that day. Many industry participants believe that the damage was more severe than the FTX collapse. Since then, there has been extensive discussion about why it happened and how to prevent a recurrence. The root causes are not difficult to identify,” Xu said.
Star argued that the risk began when traders were forced to treat USDe like cash. According to their account, users were encouraged to exchange stablecoins for USDe to earn attractive returns, then use the USDe as collateral to borrow more stablecoins, convert them back to USDe, and repeat the cycle. The loop created a self-feeding leverage machine that made returns look safer than they were.
“Binance users were encouraged to convert USDT and USDC into USDe for attractive returns, without enough focus on the underlying risks,” he said. “From a user perspective, trading USDe seemed no different from trading traditional stablecoins, while the actual risk profile was materially higher.”
When volatility hits, Star said, that structure wouldn’t need a big trigger to relax. He claimed that the cascade helped turn a sell-off into a wreck and left lasting damage on exchanges and users.
“BTC started falling about 30 minutes before the USDe took off. This exactly supports the previous point: the initial move was a market shock. Without the USDe leverage loop, the market would likely have stabilized at that point. The cascading liquidations were not inevitable: they were amplified by the structural leverage, as explained above,” he said.
Others in the market rejected Star’s tweets.
Dragonfly partner Haseeb Qureshi called Star’s story “ridiculous” and said it attempts to force a clean villain into an event that doesn’t fit a simple narrative. He argued that the crash did not unfold like a classic stablecoin explosion that spreads everywhere at once.
If a single symbolic failure really drove the day, he said, the stress would have manifested widely and synchronously across all locations.
“USDe price diverged ONLY on Binance, it did not diverge elsewhere,” he said. “But the sell-off spiral was happening everywhere. So if the USDe ‘depeg’ didn’t spread throughout the market, you can’t explain how *every single exchange* experienced huge sell-offs.”
With all due respect to Star, this story is downright ridiculous.
Star is trying to claim that the root cause of the 10/10 was Binance creating an Ethena yield campaign, which caused USDe to become overleveraged by traders who placed it on Binance, which was eventually unwound due to a small… pic.twitter.com/7YX529JAjN
— Haseeb ＞|＜ (@hosseeb) January 31, 2026
Qureshi’s alternative explanation is that the macroeconomic headlines simply spooked an already leveraged market. Liquidations began when liquidity declined rapidly.
Once that cycle begins, he said, it becomes reflective. Fire sales drive lower prices, which triggers more fire sales, with few natural buyers willing to step in during the chaos.
Earlier in the day, Binance attributed the Oct. 10 flash crash to a macro-driven sell-off that collided with high leverage and fading liquidity, rejecting claims of a core trading system flaw, as CoinDesk reported.
On Friday night, CZ tweeted at Qureshi with a sharper line that pointed to both motive and mechanics. “Dragonfly is/was one of OKX’s biggest investors,” CZ wrote, adding: “The data speaks. The timing doesn’t match. It’s good to see people understanding the facts.”
Star, however, rejected CZ’s characterization of Dragonfly’s relationship with OKX.
“Dragonfly has never been an investor in OKX,” he wrote, adding that OKX invested in Dragonfly before Qureshi joined the company, and that a partner’s previous fund, not Dragonfly, had invested in OKX.
He added that the details are “different and easily verifiable” and that he would not speak further.
However, not everyone believes in the idea of a single villain. Some market watchers say the liquidation was simpler and driven by excess leverage and weak underlying demand, rather than a platform or product.
“Markets crashed because the industry was over-leveraged and macro revealed that there was no sustainable organic offering for it,” Seraphim Czecker, former head of growth at Ethena Labs, said on X.
