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.
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.
“No complexity. No accident. 10/10 was caused by irresponsible marketing campaigns by some 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. Many in the industry believe that the damage was more serious than the collapse of FTX. Since then, there have been many discussions about the reasons for this incident and how to avoid a recurrence. The root causes are not difficult to identify,” Xu said.
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.
“Binance users have been encouraged to convert USDT and USDC to USDe to earn attractive returns, without adequately emphasizing the underlying risks,” he said. “From a user perspective, trading with USDe seems no different from trading with traditional stablecoins, while the actual risk profile was significantly higher.”
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.
“BTC started to decline about 30 minutes before the USD deindex. This exactly confirms the previous point: the initial move was a market shock. Without the USDe leverage loop, the market would likely have stabilized at this point. The cascading liquidations were not inevitable: they were amplified by structural leverage, as explained previously,” he said.
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.
On Friday evening, CZ tweeted Qureshi with a sharper line that was as much about motive as mechanics. “Dragonfly is/was one of OKX’s largest investors,” CZ wrote, adding, “The data speaks. Time doesn’t match. It’s good to see people understanding the facts.”
Star, however, dismissed CZ’s characterization of Dragonfly’s relationship with OKX.
“Dragonfly has never invested in OKX,” he wrote, adding that OKX had invested in Dragonfly before Qureshi joined the firm, and that a partner’s previous fund, not Dragonfly, had invested in OKX.
He added that the details are “distinct and easily verifiable” and that he would not engage further.
However, not everyone accepts the idea of a single villain. Some market observers say the selling was simpler and driven by excessive leverage and low underlying demand rather than a single platform or product.
“Markets collapsed because the industry was overleveraged and the macro revealed that there was no sustainable organic supply for it,” Seraphim Czecker, former head of growth at Ethena Labs, said on X.
