USDe Depeg on Binance Attributed to Oracle Glitch and Potential Exploit, Says Ethena Founder
The sharp drop in the price of USDe on Binance, which saw the synthetic stablecoin plunge to $0.65, has sparked intense debate within the crypto community. According to Guy Young, founder of Ethena Labs—the team behind USDe—the incident was not due to systemic flaws in the token’s design or its underlying collateral, but rather stemmed from a misconfiguration in Binance’s internal oracle system.
Young clarified that the depegging was isolated to Binance and not reflective of broader issues with USDe. He emphasized that the protocol behind the dollar-pegged synthetic asset functioned as intended during the market turbulence. “Minting and redeeming of USDe operated flawlessly,” Young said, noting that over $2 billion worth of redemptions were processed across major decentralized exchanges such as Curve, Fluid, and Uniswap within 24 hours, with price slippage contained to under 30 basis points.
The problem, according to Young, arose from Binance’s use of its own internal orderbook as the price oracle for USDe. The thinner liquidity in Binance’s USDe orderbook, compared to global liquidity pools, led to an inaccurate representation of USDe’s market value during the flash crash. If Binance had instead relied on external oracles reflecting deeper market data, the depeg event—and the resulting liquidations—could have been avoided, Young asserted.
The flash crash, which occurred on a Friday, cascaded into what analysts have described as the largest 24-hour liquidation event in the history of cryptocurrency. An estimated $20 billion in open leveraged positions were wiped out, although some suggest the actual financial impact may be significantly higher.
Speculation has emerged that the USDe price collapse on Binance may not have been a mere technical error, but potentially the result of a coordinated exploit. A notable theory from trader ElonTrades proposes that attackers manipulated Binance’s “Unified Account” system, which at the time used Binance’s internal data for valuing collateral like USDe.
This feature—scheduled for an upgrade on October 14 to integrate external oracle feeds—was allegedly exploited before the fix could be implemented. According to the theory, attackers offloaded as much as $90 million of USDe on Binance, deliberately driving its price down to $0.65. This tactic triggered mass liquidations of users who had used USDe as collateral, reportedly amounting to over $1 billion in forced selloffs.
Simultaneously, the attackers are said to have placed substantial short positions on Bitcoin and Ethereum via the decentralized perpetuals exchange Hyperliquid. This occurred just minutes ahead of a U.S. policy announcement that triggered panic selling across markets. As the depeg-induced liquidation spiral unfolded, the attackers purportedly reaped a staggering $192 million in profits from their leveraged shorts.
In the wake of the event, leading crypto exchange executives, including Crypto.com CEO Kris Marszalek, called for a formal investigation into the role of centralized platforms in exacerbating market instability.
The incident has reignited scrutiny over the reliability of centralized price feeds and the risks associated with using internal oracles for high-leverage trading products. It also highlights how vulnerabilities in one part of the crypto ecosystem—such as an exchange’s oracle setup—can have ripple effects across decentralized platforms and lead to systemic risk.
The Ethena team has been quick to distance the depeg from any flaws in the USDe design. The synthetic dollar is backed by a delta-neutral strategy involving collateralized crypto assets and hedging via perpetual futures, intended to maintain price stability. According to Young, that mechanism functioned without issue throughout the crash.
This episode also underscores the importance of integrating external, decentralized oracle services, particularly for platforms offering leveraged trading or collateralized borrowing. Centralized price sources, such as those drawn from internal orderbooks, are more susceptible to manipulation, especially in times of low liquidity or market stress.
Beyond the immediate financial impact, the USDe depeg has damaged confidence in stablecoin reliability on centralized exchanges. For traders and developers alike, it serves as a cautionary tale about the reliance on proprietary infrastructure that may not reflect real market conditions.
Moreover, the event has raised broader questions about the governance of exchange features, such as Unified Accounts, and whether exchanges should be held more accountable for protecting users from systemic flaws. As decentralized finance continues to grow, greater transparency and third-party validation of price data may become essential.
For now, Ethena Labs maintains that the USDe peg remains fundamentally secure, citing its performance across decentralized platforms as evidence. The company is actively engaging with centralized exchanges to prevent similar issues in the future, including advocating for the use of deep liquidity pools and verified external oracles for pricing data.
As the crypto market matures, the need for robust, tamper-resistant infrastructure becomes more urgent. Events like this depeg point to the critical importance of cross-platform data integrity, especially in times of heightened volatility. While USDe’s core mechanisms may have proven resilient, its temporary collapse on a major exchange has opened a new chapter in the discussion on stablecoin stability and exchange accountability.