On October 10, 2025, the global cryptocurrency market experienced a sudden and severe flash crash, with mainstream asset prices plummeting instantly. ETH was once smashed down to $2700.11, and the violent fluctuations swept through spot, contracts, and on-chain ecosystems in a short period. In the aftermath, public opinion quickly split: one side pointed fingers at Binance's USDe yield products, arguing that unlimited collateral and high-yield narratives amplified leverage and systemic risks; the other side emphasized that the macro environment and the high-leverage structure of the entire market were the real "time bombs," with a single platform merely acting as the fuse. Binance subsequently confirmed a $328 million compensation plan and released a report stating that "the core system operated normally throughout," but the disputes surrounding responsibility boundaries and sources of risk did not subside. Was this an incident triggered by the imbalance in the product design of a single platform, or was it an inevitable systemic crisis that would arise against a backdrop of high leverage and fragile liquidity?
From Yield Frenzy to Panic: USD…
● The high-yield narrative had spread layer upon layer in the preceding months, with USDe being packaged as a "stackable and cyclical" yield tool, continuously amplified in communities and social platforms. The related annualized and leveraged yield figures were still unverified information, yet they were enough to attract a large amount of capital to use it as collateral for repeated leverage. For many users, USDe was not just an asset but a core piece of the "yield script," with risk assessments often lagging behind yield imaginations, laying the groundwork for subsequent concentrated panic.
● OKX CEO Star publicly named Binance after the flash crash, criticizing it for allowing USDe to be almost "infinitely collateralized," accumulating imperceptible leverage and correlation risks at the system level. His core logic was: when an asset driven by a yield narrative can be infinitely stacked in the collateral system, any price disturbance will be magnified, becoming a resonance source for the entire market, not just a single currency's volatility. Star viewed this as a "systemic risk written into product design," rather than a mere volatility accident.
● In response to the accusations, Binance clearly stated in its official report that "the core system operated normally throughout," emphasizing that the matching engine and risk control module did not experience technical failures on the day of the flash crash, denying that there were fatal flaws in the product design. Binance attributed the incident more to extreme market volatility and external liquidity contraction, attempting to prove its compliance with conventional risk control boundaries through existing mechanisms like contract parameters and risk warnings, thus shifting the focus from "design errors" to "market extremity."
● As both sides' statements escalated, a "war of words" originally centered around the single USDe product quickly elevated to a "debate on industry systemic risks." On one side were voices represented by OKX, attempting to shape the collateral rules and yield structure of USDe as a sample source of systemic risk; on the other side, Binance and some supporters emphasized that the high leverage and risk-averse sentiment across the entire market were the key variables. This split narrative actually reflects the fundamental divergence within the industry on how to balance "high-yield innovation" and "system safety bottom lines."
Macroeconomic Headwinds Combined with Leverage Resonance: W…
● Wintermute founder Evgeny Gaevoy publicly stated that "it is irrational/untruthful to place all the blame on a single exchange," shifting the focus from a single platform to the entire market structure. He believed that this round of flash crash occurred against a backdrop of rising macro risks and tightening liquidity, with the overall market leverage already at high levels. Blaming a single yield product or exchange is a simplification and evasion of reality, and it does not truly promote progress in risk governance.
● Around October 10, ETH and BTC both experienced severe fluctuations, with prices piercing up and down, amplifying panic sentiment. At the same time, multiple large fund transfers and security incidents occurred on-chain, including a single 4556 ETH (approximately $12.25 million) security incident, as well as several funds rapidly migrating between different protocols and platforms. These events deepened participants' concerns about system security and asset stability, while also disrupting the already fragile liquidity distribution on a technical level, making price fluctuations harder to buffer with market depth.
● From a macro perspective, the market was already in a "high leverage + low tolerance" danger zone before the flash crash: global risk assets were under pressure, risk appetite was declining, while the internal structure of crypto assets still maintained a yield-oriented approach, with funds layered between margin, lending, and derivatives. Even without the USDe-related incident, as long as there was a sufficiently strong external shock or a crack in confidence in a certain link, the overall structure could easily trigger a chain de-leveraging, indicating that this crisis was more like a concentrated release after long-term accumulation rather than an isolated incident of a single product.
● In the public opinion arena, the narratives of "single platform responsibility" and "macro structural issues" formed a stark contrast. Some retail investors were more inclined to attribute losses to specific platforms or single products, as these were tangible and visible, aligning more with emotional venting logic; while many professional institutions and market makers emphasized the macro environment, cross-platform leverage chains, and correlation exposures, believing that questioning "who is to blame" was less important than questioning "how fragile is the structure." This cognitive differentiation also reflects the significant differences among participants in information acquisition, risk control capabilities, and expectations of responsibility.
Liquidity Instantly Withdrawn: Contract Liquidation…
● On the day of the flash crash, ETH's price was once driven down to $2700.11, and this confirmed price point became a concentrated marker of panic sentiment among market participants. The rapid drop brought many margin positions close to or below maintenance levels, triggering passive liquidation and forced selling across multiple platforms. Due to the lack of more detailed minute-level market data, we cannot fully restore the game details behind each candlestick, but it can be confirmed that the liquidation chain and liquidity withdrawal exploded in a very short time as prices quickly fell through key ranges.
● The so-called "liquidity black hole" was particularly evident in this incident: market makers were forced to shrink bid-ask spreads and reduce order sizes during extreme volatility, causing the order book to thin out instantly and slippage to be dramatically amplified. When panic selling surged, insufficient depth led to prices breaking down one level after another, with buy-side vacuum areas continuously expanding, automatically triggering more forced liquidations and stop-loss sell-offs, resulting in a continuous downward spiral. Technical systems could "operate normally," but in the absence of sufficient counterparties, prices fell like they were in a gravity well, making it difficult to find reliable support in the short term.
● On-chain cases further revealed the vulnerability of individual accounts in extreme market conditions. Research briefs mentioned a single 4556 ETH (approximately $12.25 million) security incident occurring before and after the flash crash, amplifying concerns about asset safety and protocol risks in a panic environment. At the same time, a new address chased the price of XAUT amid the emotional chaos, subsequently incurring a $431,000 floating loss, becoming a typical "high-position buyer." These cases intertwined with the overall market volatility, indicating that when systemic pressure strikes, whether due to technical accidents or emotion-driven buying and selling, it will be magnified by the market into a broader confidence shock.
● It is worth emphasizing that due to the current lack of global total forced liquidation amounts and the distribution of major platforms, there is a significant blind spot in external assessments of the scale of this liquidation. We cannot accurately quantify how much leverage was "squeezed out of the system" in a short time, nor can we precisely break down the loss structures of various accounts. This lack of transparency not only makes post-event reviews difficult to delve into but also makes it hard for participants to quickly and rationally price systemic risks during the event.
Exchange Games and Compensation Chess: 3…
● After the flash crash triggered widespread questioning, Binance quickly acted, confirming a $328 million compensation plan and simultaneously releasing a report explaining the system's operation on that day. In chronological order, the controversy surrounding USDe and contract trading fermented in the community, followed closely by OKX CEO Star's public accusations, which pushed public opinion to a climax. Binance responded with a combination of "system normal + large compensation" in an attempt to stabilize user confidence. This series of actions showed that compensation was not only a technical aftermath but also a preemptive public relations move.
● In a highly tense atmosphere of public opinion and emotion, the figure of $328 million itself constituted a kind of "attitude signal," helping Binance gain some initiative in the narrative of morality and responsibility. On one hand, the compensation alleviated some of the anger from affected users towards the platform, shifting some of the blame from "you caused my losses" to "at least you are willing to take responsibility"; on the other hand, it also inadvertently pressured other platforms—whether they needed to follow up with similar levels of compensation in similar incidents and whether they had the capacity to allocate equivalent resources would affect their image and bargaining power in the industry competition landscape.
● In this tug-of-war over discourse and responsibility, entities like OKX and Wintermute played different roles. OKX emphasized the accusations against "infinite collateral" and systemic risks, which stemmed from a risk governance standpoint but also inevitably carried a competitive dimension; Wintermute elevated the focus to macro and structural levels, diluting single-platform attribution by stating that "placing all the blame on a single exchange is irrational/untruthful." This difference in stance relates to their respective business models and risk exposures, as well as their differing expectations for the future direction of industry rules.
● From a longer-term perspective, this compensation and blame-shifting battle may become an important reference for future industry risk control standards and high-yield product designs. The $328 million compensation set a certain "baseline sample," but it also raised market expectations for leading platforms to "underwrite" during extreme events; while the debates surrounding USDe's collateral and yield structure would force subsequent products to accept higher scrutiny regarding collateral limits, risk isolation, and information disclosure. Whether exchanges or market makers, they must reassess how to define and bear their share of responsibility in systemic risks while pursuing yield and scale.
Retail Investors vs. Smart Money: On-Chain…
● At the most chaotic moment in the market, one address chose to go against the trend and make a significant move. Reports show that a certain address bought 3667.51 ETH, worth approximately $9.996 million, becoming a highly noted "bottom-fishing sample" in this flash crash. For such funds, short-term price fluctuations and public opinion trends do not constitute the core of decision-making; they are more concerned with whether the current price reflects overly pessimistic expectations and whether future liquidity will return. If their judgment is correct, this will be a high-cost performance left-side layout; if their judgment is wrong, they may become "smart money" long trapped in a liquidity collapse zone.
● In stark contrast is the new address that chased the price of XAUT: in an environment of heightened risk and uncertainty, it chose to rush into what was perceived as a relatively safe asset, but due to entering too late, it faced a $431,000 floating loss. On one side is the "big buyer" who dares to take on mainstream assets when blood is flowing, while on the other side is the latecomer trying to escape to "safe assets" but ends up buying high. The stark difference in their fates vividly presents the harsh reality of "who is bottom-fishing and who is standing guard" during extreme volatility.
● For institutional market makers and large on-chain holders, the flash crash resembled a forced acceleration of risk reallocation. Some entities quickly shrank their market-making positions and reduced exposure to risk assets when prices initially fell, to prevent being caught in deeper liquidation chains; others cautiously hedged between spot and derivatives, taking advantage of the huge price differences and liquidity discounts during the panic. Based on disclosed large on-chain transfers and cases, we can infer that large funds are more focused on transferring "tail risks" during the rising phase of systemic risks rather than simply betting on a rebound.
● Looking back at the entire event from these on-chain fragment stories, a more fundamental question emerges: Who truly understood and priced this systemic risk? Was it the large players who could mobilize millions of dollars and decisively increase their positions in mainstream assets during the flash crash, the risk control teams that could quickly identify structural vulnerabilities in yield products, or those institutions and KOLs attempting to reconstruct the narrative framework on social media? For the vast majority of ordinary users, they often realize they have been gambling at the same "leverage and liquidity" table with faster and more professional players only after the price has already provided the answer.
Countdown to the Next Flash Crash: Can the Industry…
The flash crash on October 10 intertwined two originally parallel main lines in a crude manner: one represented by USDe's high-yield design flaws—insufficient collateral rules, yield stacking, and risk isolation made the product itself more like an amplifier; the other was the already accumulated fragility of the macro leverage structure—against the backdrop of tightening global liquidity and declining risk appetite, the overall leverage in the crypto market remained high, and any localized shock could potentially evolve into systemic resonance. The combination of both made what could have been a risk event limited to a specific product or single platform escalate into a liquidity crisis across markets and chains.
The game surrounding USDe and the $328 million compensation plan is essentially a renegotiation of the boundaries of responsibility and authority between exchanges, market makers, and users. Platforms hope to demonstrate their diligence through "system normal + post-event compensation," but cannot avoid extreme market conditions; market makers and institutions emphasize structural risks and macro dynamics, attempting to downplay the attribution to a single entity; while users, after bearing real losses, often find the determination of "who should be responsible" to be much more direct than technical analysis. The outcome of this multi-party game will subtly reshape the industry's approach to balancing "innovation freedom" and "system safety."
Looking to the future, at least three points are worth continuous observation. First, whether the collateral limits and information disclosure of high-yield products can form a clearer industry consensus to avoid the repetition of the "infinite collateral + ambiguous risk" model; second, whether a baseline consensus on exchange risk control standards will emerge among leading platforms, from risk parameters and liquidation mechanisms to emergency plans, transcending the self-serving narratives of individual platforms; third, in extreme market conditions like those on October 10, whether transparent, verifiable data can be disclosed more quickly and completely, allowing participants to price systemic risks more realistically rather than being swept up in emotional turmoil amid information fog.
Between the impulse for yield and the memory of risk, the crypto industry continues to sway through cycles of bull and bear markets and flash crashes. The liquidity black hole of October 10 may just be a violent interlude in a long cycle, but the next resonance point will not automatically disappear due to this debate. What is truly worth questioning is: before the next peak arrives, can this industry timely repair the structural cracks that have already emerged in the pursuit of yield, or will it be forced to passively wait for answers under the shadow of the countdown to the next flash crash?
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