Headline: Wintermute founder rejects blame on Binance for Oct. 10 flash crash, points to leverage, illiquidity and macro shock Evgeny Gaevoy, founder of market-maker Wintermute, pushed back hard against claims that Binance caused the October 10 crypto market flash crash, calling attempts to pin the event on a single platform “intellectually dishonest.” Writing on X, Gaevoy said the episode was “very obviously not a ‘software glitch’” but rather a classic flash crash: a mega‑leveraged market, hit by macro news during an illiquid Friday night trading window. The exchange at the center of the dispute is Binance, which was criticized publicly by OKX CEO Star Xu. Xu argued that Binance’s aggressive promotion of USDe — a stablecoin product offering roughly 12% yields — and its acceptance as collateral without clear risk warnings created systemic vulnerabilities that helped trigger the rout. Tens of billions of dollars were liquidated on October 10, and some industry figures warned the event fundamentally altered crypto market microstructure; comparisons to the severity of FTX’s collapse were even floated. How OKX says the loop worked - Users converted USDT and USDC into USDe to capture the advertised 12% yield. - They then used USDe as collateral to borrow USDT, redeployed those funds back into USDe and repeated the cycle. - That leverage loop pushed apparent APYs into the high double digits — reports cited 24%, 36% and even more than 70% — producing the illusion of low-risk, outsized returns because a major platform was offering them. - When volatility arrived, USDe depegged, cascading liquidations followed, and weaknesses in risk management around assets such as WETH and BNSOL amplified the crash. Some tokens briefly traded near zero. Xu framed this as a systemic change: “No complexity. No accident. 10/10 was caused by irresponsible marketing campaigns by certain companies,” he wrote, while insisting his aim was to analyze root causes rather than to mount a personal attack on Binance. Gaevoy’s rebuttal Gaevoy argued that scapegoating a single exchange is a convenient but inaccurate explanation. He said the crash came after a macro catalyst — the article notes an announcement of steep tariffs — hit an overleveraged market in a period of thin liquidity. The Friday night timing mattered, he added, because fewer market makers were active and therefore there was less liquidity to absorb forced selling. He urged public figures to choose their words carefully in describing market events, especially during a bear market when emotions and losses are acute. Market fallout and context - CoinGecko data cited in the wake of the event showed total crypto market capitalization fell 23.7% in Q4 2025. - Tens of billions of dollars in positions were liquidated on October 10 alone. - Industry debate has centered on whether the proximate cause was product design and marketing, collateral rules, risk-management failures, or simply the confluence of macro shock, excessive leverage and illiquidity. Why it matters The clash highlights two persistent tensions in crypto: the incentives created by high‑yield marketing and permissive collateral practices, and the limits of liquidity during stress periods. Regulators, exchanges and institutional participants will likely be watching how platforms market yield products, set collateral rules, and manage systemic risk — because when leverage and illiquidity converge, the results can be dramatic regardless of which venue happens to sit at the center of the storm. Read more AI-generated news on: undefined/news

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