The recent depeg of the USDe synthetic dollar on Binance, which saw its value drop to $0.65, has been identified by Guy Young, founder of Ethena Labs, as a result of an isolated issue rather than fundamental factors.
Young noted that USDe transactions functioned “perfectly” during a stressful market period, with $2 billion worth of USDe redeemed within just 24 hours across various platforms like Curve and Uniswap. He highlighted that the liquidity problems on Binance were due to the use of oracle data from its own order book, leading to the severe price divergence.
“The severe price discrepancy was isolated to a single venue, which referenced the oracle index on its own orderbook, not the deepest pool of liquidity, and was facing deposit and withdrawal issues during the event, which did not allow market makers to close the loop.”
Translation: The major price difference was contained to one platform, which depended on its own reference data rather than broader market liquidity, causing deposit and withdrawal delays that hindered market actions.
Young also stated, “No one would have been liquidated on any money market with oracles referencing the deepest pools of liquidity for USDe globally.”
The Friday market crash triggered the largest liquidation event in crypto history, resulting in a $20 billion loss in open leveraged trades.
Speculations on Possible Attacks
Trader ElonTrades suggests that the USDe depeg could be the result of a coordinated attack, utilizing Binance’s “Unified Account” feature, which depends on internal data. This feature presents a significant risk and is slated for improvements by October 14.
In this incident, attackers reportedly sold off approximately $90 million of USDe on Binance, causing a price drop and triggering widespread liquidations. They simultaneously shorted Bitcoin and Ethereum leading to profits of around $192 million as the market faltered.
Kris Marszalek, CEO of Crypto.com, has initiated a call for investigations into exchanges that faced substantial losses during this event, underlining the tumultuous environment traders are currently navigating.
