Binance blamed the Oct. 10 flash crash on a macroeconomic shock involving high leverage and evaporating liquidity, rather than a breakdown of its trading systems following speculative chatter on social media.
In a report released on Saturday, the exchange said global markets were already under pressure following trade war headlines when crypto markets collapsed. Bitcoin and Ether rallied for months in early October, leaving traders heavily positioned and exposed.
At the time, open interest in Bitcoin futures and options exceeded $100 billion, creating conditions ripe for forced deleveraging once prices began to fall, he said.
The liquidation quickly fed on itself. As prices fell, market makers activated automated risk controls and reduced exposure, thereby removing liquidity from order books. Data cited by Binance, from Kaiko, showed that offering-side depth nearly disappeared on several major exchanges at the height of the move. With fewer orders pending, even small clearances have driven prices down sharply.
The disruption was not limited to crypto. U.S. stock markets lost about $1.5 trillion that day, with the S&P 500 and Nasdaq posting their biggest one-day declines in six months. Binance said around $150 billion in systemic liquidations had taken place in global markets.
Blockchain congestion has added to the tension. Ethereum gas fees have at times exceeded 100 gwei, slowing transfers and limiting arbitrage between sites. With capital unable to flow quickly, price differentials widened and liquidity became further fragmented.
Binance Incidents Occurred
Binance acknowledged two platform-specific incidents during the crash, but said neither caused the broader market movement.
The first involved a slowdown in its internal asset transfer system between 9:18 p.m. and 9:51 p.m. UTC, affecting transfers between spot, forward and futures accounts. Core trading systems remained operational, but some users temporarily saw zero balances displayed due to backend timeouts.
Binance said the issue stemmed from a regression in database performance when traffic increased and has since been resolved. The affected users have been compensated.
The second incident involved temporary index deviations for USDe, WBETH, and BNSOL between 9:36 p.m. and 10:15 p.m. UTC, when most liquidations had already occurred. Binance said low liquidity and the delay in rebalancing between venues caused local price fluctuations to disproportionately affect index calculations.
Changes in methodology have since been implemented and affected users have been compensated.
Binance said about 75% of the day’s liquidations occurred ahead of index gaps, pointing to the initial macroeconomic shock as the main driver.
In total, the exchange said it has compensated users with more than $328 million and launched additional support programs to stabilize participants affected by the crash.
