Nearly four months after the record crypto crash of October 10 wiped out leveraged positions in the market, the industry is still arguing over what actually broke.
That argument turned into a public feud Saturday after OKX founder and CEO Star Xu claimed the crash was neither complicated nor accidental, but the result of irresponsible yield 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 hit crypto at the worst time. With leverage already built up, the initial decline turned into a wipeout with approximately $19.16 billion in liquidations, including approximately $16 billion from long bets, as forced selling cascaded across all venues.
No complexity. No accidents.
The 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-bearing 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 pushed to treat USDe like cash. In his story, users were encouraged to trade stablecoins for USDe to earn attractive returns, then use USDe as collateral to borrow more stablecoins, convert them back to USDe, and repeat the cycle. The loop created a self-powered leverage machine that made returns appear safer than they were.
When volatility hits, Star said, this structure would not need a significant trigger to unwind. He claimed the stunt helped turn a sale into a wipeout and left lasting damage to exchanges and users.
Star later pushed back against the criticism, saying the sequence of events actually strengthens his argument rather than undermining it.
Bitcoin started falling about 30 minutes before USDe showed tension, he said, confirming that the initial trigger was a broader market shock. Without the leverage loop built around USDe, Star argued, the selloff could have stabilized. Instead, built-in leverage turned a routine drawdown into a cascading liquidation event that was self-perpetuating.
Other market players pushed back against Star’s tweets.
Dragonfly partner Haseeb Qureshi called Star’s story “ridiculous”, saying it attempts to force a clean villain into an event that doesn’t fit a straightforward narrative. He argued that the crash did not unfold like a classic stablecoin explosion that spreads everywhere at once.
If a single symbolic failure had really motivated the day, he said, the stress would have manifested itself widely and in synchrony across all sites.
“The price of USD has diverged ONLY on Binance, it has not diverged on other sites,” he said. “But the liquidation spiral was happening everywhere. So if the USDe depeg didn’t spread across the market, it can’t explain how *every exchange* experienced huge wipeouts.”
With all due respect to Star, this story is frankly ridiculous.
Star is trying to claim that the root cause of the 10/10 was that Binance created an Ethena yield campaign, which caused USDe to become overleveraged by traders looping it onto Binance, which ultimately unraveled 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 indebted market. Liquidations began as liquidity rapidly dwindled.
Once this cycle starts, he says, it becomes reflexive. Forced selling drives prices down, which triggers more forced sales, with few natural buyers willing to step in when chaos occurs.
Earlier today, Binance attributed the Oct. 10 flash crash to a selloff driven by high leverage and vanishing liquidity, rejecting claims of a fundamental failure in the trading system, as CoinDesk reported.
