The global crypto market continues to unpack the real cause behind the violent sell-off that rocked digital assets in mid-October, wiping out tens of billions of dollars in liquidations within hours. Now, OKX CEO Star Xu is openly pointing to what he describes as a dangerous leverage cycle enabled by Binance, one that quietly transformed a yield product into a systemic risk engine. In a detailed public statement shared on X, Star Xu argued that the October 11 crash was not a random volatility event but the result of structural failures created by how USDe was promoted, treated, and repeatedly leveraged across the market. His comments, which can be found, are quickly reshaping industry conversations around risk management and exchange responsibility. No complexity. No accident. 10/10 was caused by irresponsible marketing campaigns by certain companies. On October 10, tens of billions of dollars were liquidated. As CEO of OKX, we observed clearly that the crypto market’s microstructure fundamentally changed after that day.… pic.twitter.com/N1VlY4F7rt — Star (@star_okx) January 31, 2026 According to Xu, the fallout has already altered the microstructure of crypto trading itself. “On October 10, tens of billions of dollars were liquidated. As CEO of OKX, we observed clearly that the crypto market’s microstructure fundamentally changed after that day,” he stated. Many market participants now believe the damage surpassed even the collapse of FTX, a claim that underscores just how deeply the shockwaves traveled. Binance’s USDe Yield Campaign Sparked A High-Risk Leverage Loop At the center of Xu’s criticism is a temporary user-acquisition campaign launched by Binance that offered an eye-catching 12% APY on USDe holdings. While high yields are nothing new in crypto, the issue, according to Xu, was how Binance allowed USDe to function almost identically to traditional stablecoins like USDT and USDC, including being used as collateral with no meaningful restrictions. This effectively positioned USDe as a “safe” asset in traders’ eyes, despite carrying a much higher embedded risk profile. Users were encouraged to convert their USDT and USDC into USDe to chase returns, often without clear communication about the underlying exposure they were taking on. From the surface, it looked like a simple yield opportunity. Under the hood, it was something far more dangerous. USDe Operates Like A Tokenized Hedge Fund, Not A Stablecoin Star Xu emphasized that USDe is fundamentally different from standard stablecoins or low-risk tokenized funds. USDe is issued by Ethena, which raises capital through what it markets as a “stablecoin,” then deploys those funds into index arbitrage and algorithmic trading strategies, essentially running hedge-fund-style operations and tokenizing the resulting positions. The token can then be deposited on exchanges to earn yield. This structure, Xu explained, embeds hedge-fund-level risk directly into a product many users treated like digital cash. That’s where the danger emerged. He contrasted USDe with tokenized money market funds such as BlackRock’s BUIDL and Franklin Templeton’s BENJI, which are designed around conservative, low-risk financial instruments. USDe, by comparison, carries structural trading exposure. “The difference is not cosmetic, it is fundamental,” Xu noted. Yet on major platforms, that distinction was barely visible to everyday traders. Repeated Collateral Cycling Pushed Leverage To Extreme Levels What turned risk into systemic instability was the feedback loop Binance’s collateral structure enabled. According to Xu, users began following a repeating strategy: They converted USDT and USDC into USDe to earn yield. They used USDe as collateral to borrow USDT. They converted the borrowed USDT back into USDe. They repeated the cycle again and again. Each loop stacked more leverage onto the system. On paper, traders saw APYs balloon to 24%, 36%, even above 70%. Because these opportunities existed on one of the world’s largest exchanges, many assumed the risk was minimal. In reality, leverage was quietly compounding across the entire market. Systemic exposure wasn’t isolated to one platform, it spread globally. And once enough pressure built up, all it took was a relatively small shock to bring the structure down. Depegging Triggered Liquidation Cascades Across The Market When volatility finally hit, the weakness of the system surfaced instantly. USDe began to depeg. That single break triggered massive forced liquidations as leveraged positions unraveled in rapid succession. Collateral values dropped, margin calls accelerated, and automated sell-offs flooded the market. Xu also pointed to risk management gaps around assets like WETH and BNSOL, which amplified price crashes even further. Some tokens briefly traded close to zero as liquidity vanished. The result was one of the most violent liquidation events in crypto history. “The damage to global users and companies, including OKX customers, was severe, and recovery will take time,” Xu said. What had started as a yield promotion ended as a systemic breakdown. Industry Leaders Face Growing Pressure Over Risk Transparency Despite the sharp critique, Xu stressed that his goal is not to attack Binance personally but to spotlight the deeper structural problems that allowed such risk to accumulate unnoticed. He warned that open discussion may trigger backlash and misinformation but insisted that transparency is essential if crypto is to mature into a trustworthy financial system. “As the largest global platform, Binance has outsized influence, and corresponding responsibility, as an industry leader,” he stated. In Xu’s view, long-term trust cannot be built on aggressive yield incentives, excessive leverage, or marketing that blurs real risk. Instead, exchanges must prioritize: • Clear risk disclosure • Responsible collateral frameworks • Limits on recursive leverage • Market stability over short-term user growth The industry, he added, needs leadership focused on sustainable innovation, not a winner-take-all mindset where criticism is treated as hostility. A Turning Point For Crypto Market Structure The October crash is increasingly being seen not as an isolated event, but as a structural wake-up call. Just as the 2022 collapses reshaped custody and proof-of-reserves practices, this latest meltdown is now forcing hard conversations around leverage design, yield products, and how exchanges present risk to users. Star Xu’s comments have already fueled broader debate among traders, analysts, and platform operators. If his assessment holds, the real lesson of October isn’t about one token depegging, it’s about how modern crypto infrastructure can quietly turn complex financial engineering into mass-market risk. And unless the industry corrects those feedback loops, the next crash may come even faster. Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services. Follow us on Twitter @nulltxnews to stay updated with the latest Crypto, NFT, AI, Cybersecurity, Distributed Computing, and Metaverse news !
