Investigating the USDe 'Depeg' Incident on Binance: A Case of Manipulation or Internal Errors?
A deep dive into the depegging of the USDe stablecoin on Binance reveals insights from Ethena's founder regarding potential internal mishaps and market implications.
The USDe synthetic dollar experienced a depegging incident on the Binance exchange, causing its value to plunge to $0.65. This event was attributed to an internal oracle malfunction rather than issues with the collateral or the token itself, as explained by Guy Young, the founder of Ethena Labs, which developed USDe.
During Friday’s flash crash, USDe transactions for minting and redemption reportedly functioned without any hitches, with $2 billion redeemed over 24 hours across exchanges like Curve, Fluid, and Uniswap, and minimal price changes of 30 basis points.
Young noted that the drop to $0.65 occurred because Binance utilized its own orderbook’s oracle data, which had less liquidity, instead of an external price source. He stated, > “The severe price discrepancy was isolated to a single venue, which referenced the oracle index on its own orderbook…"
USDe depeg on Binance
Source: Twitter - Guy Young
No liquidations would have occurred on any money market referencing the deepest liquidity pools globally, Young said.
The recent market crash sparked the largest 24-hour liquidation event in crypto history, erasing $20 billion in leveraged positions. The impact of this incident might be only the beginning of the financial repercussions, according to some traders.
Speculations on a Coordinated Attack
ElonTrades, a crypto trader, speculated that the USDe depegging was a coordinated attack that took advantage of a vulnerability in Binance’s Unified Account feature, which worked with internal orderbook data instead of external price feeds.
This exploit allowed attackers to dump up to $90 million of USDe, drastically reducing its price, leading to mass liquidations on the exchange. The attackers allegedly opened short positions on Bitcoin and Ether just before a crucial announcement from US President Donald Trump, capitalizing on the ensuing panic within the markets.
Kris Marszalek, CEO of Crypto.com, has called for an investigation into the exchanges that experienced significant liquidations during this chaotic period.
