Explanations of USDe 'depeg' on Binance focus on coordinated attack, oracles

The USDe synthetic dollar depegged on the Binance crypto exchange due to an internal oracle issue and not because of the underlying collateral, the Ethena protocol, or the token itself, according to Guy Young, the founder of Ethena Labs, the creator of USDe.

USDe minting and redeeming worked “perfectly” during Friday’s flash crash, he claimed; $2 billion in USDe was redeemed during 24 hours across crypto exchanges, including Curve, Fluid, and Uniswap, with minimal price deviations of 30 basis points (BPS) or less, Young said.

The price of USDe fell from about $1 to $0.65 on Binance during the crash because the exchange was using oracle data from its own orderbook, which had thinner liquidity, rather than an external price feed, Young said. He added:

“The severe price discrepancy was isolated to a single venue, which referenced the oracle index on its own orderbook, not the deepest pool of liquidity, and was facing deposit and withdrawal issues during the event, which did not allow market makers to close the loop.”

“No one would have been liquidated on any money market with oracles referencing the deepest pools of liquidity for USDe globally,” he said.

The market crash on Friday triggered the biggest 24-hour liquidation event in crypto history, creating a cascade that wiped away $20 billion in open leveraged positions, which could only represent the tip of the iceberg in terms of financial damage, some traders say.

Traders speculate whether USDe depeg was a coordinated attack

Crypto trader ElonTrades speculated that the USDe depegging event on Binance was a coordinated attack that exploited the “Unified Account” feature on Binance that lets users post assets like USDe as collateral.

This feature uses Binance’s own orderbook data instead of external price oracles, which ElonTrades described as a “major vulnerability” and an issue the exchange announced it would fix by October 14 by pivoting to data from external oracles. 

The attackers took advantage of this time window, dumping up to $90 million of USDe on Binance, lowering its price to $0.65 on the exchange, and igniting a torrent of liquidations on the platform up to $1 billion.

At the same time, the attackers opened up short positions on Bitcoin and Ether on the Hyperliquid perpetual futures decentralized exchange, minutes before Friday’s tariff announcement from US President Donald Trump sent traders into full-blown panic and crypto markets into a meltdown.

The attackers then netted about $192 million in profit from their short positions, as the contagion from the Binance exploit spread through crypto markets, liquidating about $20 billion due to a $100 million position, ElonTrades speculated.

The liquidation event prompted Kris Marszalek, CEO of the Crypto.com exchange, to call for an investigation of exchanges that experienced large losses.