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.
Without complexity. No 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… pic.twitter.com/N1VlY4F7rt
– Star (@star_okx) January 31, 2026
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.
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.
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.
Star later dismissed critics, saying that the sequence of events actually strengthens his argument rather than undermining it.
Bitcoin started falling about 30 minutes before USDe showed stress, he said, confirming that the initial trigger was a broader market shock. Without the leverage loop created around USDe, Star argued, the sell-off could have stabilized. Instead, built-in leverage turned a routine drawdown into a cascading liquidation event that fed on itself.
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.
