OKX CEO Says Binance’s “Leverage Loop” Lit the Fuse on the 10/10 Market Meltdown

The 10/10 crash didn’t erupt out of nowhere. Instead, it exploded because the market carried a structural weakness that everyone overlooked until it finally detonated.

OKX founder Star Xu argues that Binance’s aggressive push around Ethena’s USDe created a leverage feedback loop that amplified exposure across the entire ecosystem.

As a result, when that loop snapped, billions disappeared in hours and the industry saw how fragile its market plumbing had become.

Xu rejects the idea that 10/10 was a typical volatility spike.

Rather, he describes a system overloaded by recycled leverage, synthetic collateral, and incentives that rewarded traders for looping borrowed capital into the same yield strategy.

Consequently, once USDe showed stress, collateral values dropped, liquidation engines activated simultaneously, and liquidity thinned instantly.

More than nineteen billion dollars in leveraged positions vanished in a single day, along with over one and a half million forced liquidations.

Xu calls the event a “man‑made crisis,” arguing that incentives, not sentiment, triggered the collapse.

Furthermore, the fallout didn’t end with the losses. Xu believes the event damaged institutional confidence and exposed how deeply interconnected leverage had become across exchanges.

His criticism forces the industry to confront a difficult truth: when incentives outrun risk controls, the market doesn’t correct itself. It breaks.

How Binance’s Leverage Loop Formed the Perfect Risk Spiral

According to Xu, Binance encouraged traders to borrow, loop, and redeploy capital into USDe‑linked strategies at scale.

Consequently, this behavior didn’t just increase exposure; it multiplied it. Traders treated USDe as stable collateral even though its stability depended on complex hedging mechanics.

As more capital cycled through the loop, systemic risk grew quietly.

Therefore, when USDe wavered, every layer of leverage tied to it unraveled at once, overwhelming market makers and draining liquidity across major venues.

Why 10/10 Exposed a Deeper Market‑Structure Problem

Although Binance dismissed Xu’s claims and blamed macroeconomic pressure, Xu insisted the crash revealed a deeper flaw in crypto’s architecture.

Synthetic assets gained acceptance as low‑risk collateral without the transparency or safeguards traditional markets require.

Moreover, automated liquidation engines amplified volatility instead of containing it. Exchanges normalized aggressive incentives without accounting for the systemic risk they created.

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