Binance attributed the Oct. 10 flash crash to a macro-driven selloff colliding with heavy leverage and vanishing liquidity, rejecting claims of a core trading-system failure. The exchange said more than $100 billion in bitcoin derivatives open interest and rapidly thinning order books fueled cascading liquidations, while blockchain congestion and spiking Ethereum gas fees worsened fragmentation across venues. Binance acknowledged two platform-specific issues, compensated users with over $328 million, and said about 75 percent of liquidations occurred before its index deviations, underscoring the broader market shock as the main cause.
Binance blamed the October 10 flash crash on a macro shock colliding with heavy leverage and evaporating liquidity, rather than any breakdown in its trading systems following speculative chatter on social media. At the time, open interest across bitcoin futures and options exceeded $100 billion, creating conditions ripe for forced deleveraging once prices started to fall. The selloff quickly fed on itself. As prices slid, market makers activated automated risk controls and reduced exposure, pulling liquidity from order books.
Data cited by Binance, sourced from Kaiko, showed bid-side depth nearly vanished on several major exchanges during the peak of the move. With fewer resting orders, even small liquidations pushed prices sharply lower. The disruption was not limited to crypto. U.S. equity markets lost an estimated $1.5 trillion that day, with the S&P 500 and Nasdaq posting their largest one-day drops in six months. The first involved a slowdown in its internal asset-transfer system between 21:18 and 21:51 UTC, affecting transfers between spot, earn and futures accounts.
Core trading systems remained operational, but some users temporarily saw zero balances displayed due to backend timeouts. The second involved temporary index deviations for USDe, WBETH and BNSOL between 21:36 and 22:15 UTC, after most liquidations had already occurred. Binance said thin liquidity and delayed cross-venue rebalancing caused local price moves to disproportionately affect index calculations. Methodology changes have since been implemented, and impacted users were compensated.
Leave a Reply