The Oct. 10-11 selloff, which is estimated to have wiped out some $19 to $20 billion worth of crypto in 24 hours, has sparked a fierce post-mortem over whether market structure – or malice – turned a macro shock into cascading liquidations.
Crypto crash not random?
On X, Dr. claimed Martin Hiesboeck, head of research at Uphold, said the crash “is suspected to be a targeted attack that exploited a flaw in Binance’s Unified Account margin system,” arguing that collateral placed in assets such as USDe, wBETH, and BnSOL “had liquidation prices based on Binance’s own volatile spot market, and not on reliable external data,” which is a cascade once these instruments broke away from Binance. order books. He added that the episode was “timed to take advantage of a period between Binance’s announcement of a solution and its implementation,” calling it “Luna 2.”
It is suspected that the October 11 crypto market crash was a targeted attack that exploited a flaw in Binance’s Unified Account margin system.
The issue arose from the use of assets such as USDE, wBETH and BnSOL as collateral, whose liquidation prices were based on Binance’s own…
—Dr. Martin Hiesboeck (@MHiesboeck) October 12, 2025
Binance publicly acknowledged extraordinary price dislocations in precisely those instruments during the crash period and committed to compensating affected users. In a series of notices published from October 12 to 13 (UTC), the exchange said that “all Futures, Margin and Loan users who had USDE, BNSOL and WBETH as collateral and were affected by the depeg between 2025-10-10 21:36 and 22:16 (UTC) will be compensated, together with any liquidation costs incurred”, with the payout “calculated as the difference between the market price. at 2025-10-11 00:00 (UTC) and their respective liquidation price.” Binance also outlined “risk management improvements” following the incident.
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The depegs were violent on Binance’s books: USDe was squeezed to just around $0.65, while locked-down stake tokens wBETH and BNSOL also plummeted, briefly lowering the collateral value in Unified Accounts and triggering forced unwinds. Third party market coverage and exchange community posts documented these prints and the immediate impact on margin balances between 9:36 PM and 10:16 PM UTC.
Hiesboeck later described the series of events as a lever to meet fragile collateral mechanisms rather than pure price discovery. In a follow-up explanation, he wrote: “The Trigger: It all started with an external shock. A political post (Trump’s new tariff threat) hit the US stock market, and that fear spilled straight into crypto… The Amplifier: …too many people used massive leverage… Domino Effect: …panic selling hit-related assets that should be stable (like USDe and wBETH), causing them to ‘depegate’… The Lesson (and Binance’s) Role): Analysts say the real problem wasn’t an attack, but poor design… [the] system dumped [collateral] immediately at any cost.” He added that “Binance is now preparing a massive compensation plan.”
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A macroshock is essentially a credible first domino. The liquidation wave from October 10 to 11 was triggered by new tariff threats from US President Donald Trump against China, which led to asset de-risking and aggressive deleveraging among crypto criminals. Friday’s crash was the “largest ever” liquidation event with roughly $20 billion in liquidations in one day, wiping out more than $1.2 billion in trading capital on Hyperliquid alone.
Where the debate gets technical is over the ‘exploit’ claim. One camp points to a design gap in the way Binance’s Unified Account handled certain collateral: instead of anchoring on robust external prices, liquidation thresholds referred to internal spot pairs becoming thin and disorderly just when they were most systemically critical. That design, critics argue, created a reflexive loop in which untying collateral forced liquidations that sold more of the same collateral back into the same unstable books.
Binance, for its part, has said it will adjust the pricing logic for wrapped assets and has started compensating users who have liquidated or suffered verified losses during the specified period. The team at Ethena, whose synthetic dollar USDe was at the center of the move, claims that the problem was localized to Binance’s price/oracle trajectory and not a fundamental break in the USDe mechanism.
At the time of writing, the total crypto market cap recovered to $3.87 trillion.
Featured image created with DALL.E, chart from TradingView.com