Critical USDe Depeg: Binance Oracle Vulnerability Exposed in Alleged Coordinated Attack
The cryptocurrency market faced significant volatility recently. A notable event was the USDe depeg on the Binance exchange. This incident sent ripples through the crypto community. Many explanations have emerged for the sudden price drop. This article explores the theories surrounding the event, including claims of a coordinated attack and critical Binance oracle issues.
Understanding the USDe Depeg Event
Ethena’s synthetic dollar, USDe, experienced a sharp price deviation. On Binance, its value plummeted from $1 to $0.65. This incident raised immediate concerns. Guy Young, founder of Ethena Labs, quickly addressed the situation. He clarified that the depegging was an isolated issue. It was not tied to the fundamental health of the Ethena stablecoin. The underlying collateral and the protocol itself remained sound, he stated.
During the flash crash, USDe minting and redeeming functioned perfectly. Young highlighted this crucial point. Over $2 billion in USDe was redeemed within 24 hours. This occurred across various exchanges, including Curve, Fluid, and Uniswap. Price deviations remained minimal on these platforms. They stayed within 30 basis points (BPS) or less. This performance suggests the broader ecosystem handled the stress effectively.
Binance Oracle Issues and Liquidity Concerns
The severe price discrepancy was specific to Binance. Young explained the core reason for this isolation. Binance was reportedly using oracle data from its own orderbook. This internal orderbook had thinner liquidity. Other exchanges relied on external price feeds, which provided more robust data. Consequently, Binance’s internal data showed a skewed price. This made USDe appear significantly depegged on their platform.
Furthermore, Binance faced deposit and withdrawal issues. These problems occurred during the event. This prevented market makers from closing arbitrage loops. Such limitations exacerbate price volatility. Young emphasized that liquidations would not have happened. This holds true for money markets referencing deeper liquidity pools globally. The issue was contained to a single venue, he confirmed.
Was the USDe Depeg a Coordinated Attack?
Many traders speculate about the nature of the USDe depeg. Crypto trader ElonTrades suggested a coordinated attack. This theory points to a specific vulnerability on Binance. The “Unified Account” feature allows users to post assets like USDe as collateral. This feature relied on Binance’s internal orderbook data. External price oracles were not used. ElonTrades described this as a major vulnerability.
Binance had previously announced plans to fix this. They intended to pivot to external oracle data by October 14. Attackers allegedly exploited this time window. They dumped up to $90 million of USDe on Binance. This action drove its price down to $0.65 on the exchange. It also ignited a torrent of liquidations. Estimates suggest up to $1 billion in positions were liquidated on the platform. The USDe depeg triggered a wider market reaction.
Source: TradingView
Broader Crypto Market Crash and Fallout
The alleged attackers did not stop there. They reportedly opened short positions on Bitcoin (BTC) and Ether (ETH). These positions were placed on the Hyperliquid perpetual futures decentralized exchange. This occurred minutes before a tariff announcement from US President Donald Trump. That announcement sent traders into a panic. It triggered a wider crypto market crash.
The attackers reportedly profited significantly. They netted about $192 million from their short positions. The contagion from the Binance exploit spread quickly. It liquidated approximately $20 billion across crypto markets. This figure represents a substantial financial impact. Kris Marszalek, CEO of Crypto.com, called for investigations. He urged scrutiny of exchanges that experienced large losses. This event highlights the interconnectedness and vulnerabilities within the crypto ecosystem. Maintaining the integrity of Ethena stablecoin operations and overall market stability remains crucial.
