- Leveraged yield loops around USDe amplified hidden risk and accelerated losses during market stress events.
- Treating USDe like USDT or USDC obscured its higher-risk structure and fueled excess leverage.
- Liquidity constraints and liquidation mechanics worsened price crashes across major centralized exchanges.
The October 10 crypto liquidation has reemerged as a key reference point in ongoing discussions about market structure and risk controls across centralized and decentralized platforms. According to a recent public statement by the CEO of OKX, the events of that day marked a structural break in crypto market behavior, with consequences that some industry participants consider more disruptive than the collapse of FTX.
The sequence began with a temporary user-acquisition campaign launched by Binance, which offered a 12% annual yield on USDe. During the campaign, users could treat USDe as collateral on par with USDT and USDC, with no effective limits disclosed at the time. This structure encouraged sudden inflows into USDe from other stablecoins.
USDe, issued by Ethena, operates as a tokenized product backed by hedge-fund-style trading strategies, including index arbitrage and algorithmic positioning. The token’s risk profile differs from tokenized money market funds such as BlackRock’s BUIDL or Franklin Templeton’s BENJI, which hold lower-risk assets.
Leverage Loops and Rising Systemic Risk
As the campaign progressed, users engaged in leverage loops that amplified exposure. Participants converted USDT or USDC into USDe, posted USDe as collateral, borrowed additional stablecoins, and repeated the cycle. This process produced headline yields exceeding 24%, 36%, and in some cases 70%, while appearing operationally similar to standard stablecoin activity.
Market observers later noted that USDe’s total value locked had already exceeded $10 billion before October 10. Some analysts questioned whether the Binance campaign acted as the sole trigger or whether constrained liquidity on centralized exchanges intensified the stress once volatility increased.
Depegging, Liquidations, and Market Impact
When market conditions shifted, USDe lost its peg, setting off cascading liquidations across platforms. Weaknesses in collateral handling for assets such as WETH and BNSOL further magnified the downturn. Several altcoins recorded losses exceeding 90% on centralized exchanges, raising questions about liquidation engines and pricing feeds.
In addition, following the October 10 crypto liquidation, platforms and risk firms introduced mitigation measures, including proposals to hard-peg USDe to USDT on certain lending markets. However, participants continue to assess how leveraged yield strategies, collateral standards, and marketing practices interact to produce rapid, system-wide losses.
Related: Trump Tariffs Spark $19 Billion Crypto Liquidations in 24 Hours
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