That argument turned into a public spat on Saturday after OKX founder and CEO Star Xu claimed the crash was neither complicated nor accidental, but the result of irresponsible yield campaigns that pushed traders into leverage loops they did not understand. Star argued that the risk began when traders were nudged into treating USDe like cash. In his telling, users were encouraged to swap stablecoins into USDe for attractive yields, then use USDe as collateral to borrow more stablecoins, convert those into USDe again, and repeat the cycle.
The loop created a self-feeding leverage machine that made yields look safer than they were. Binance users were encouraged to convert USDT and USDC into USDe to earn attractive yields, without sufficient emphasis on the underlying risks, he said. From a user’s perspective, trading with USDe appeared no different from trading with traditional stablecoins—while the actual risk profile was materially higher. BTC began declining roughly 30 minutes before the USDe depeg.
This exactly supports the earlier point: the initial move was a market shock. Absent the USDe leverage loop, the market would likely have stabilized at that point. The cascading liquidations were not inevitable—they were amplified by structural leverage, as explained previously, he said.
OKX founder and CEO Star Xu has argued that the October crash was not a random event or a sign of fundamental market failure, but the consequence of irresponsible yield campaigns that pushed traders into complex leverage loops. He contends the risk began when traders were nudged into treating USDe like cash, with Binance users explicitly encouraged to convert USDT and USDC into USDe to earn yields without adequate risk disclosure. Xu notes that the market’s initial drop occurred before the USDe depeg, suggesting the shock was not solely a reaction to the depeg event but was amplified by the leveraged cycle.
He emphasizes that from a user’s perspective, trading with USDe looked similar to traditional stablecoins, even though the underlying risk was higher. The narrative portrays the loop as a self-feeding mechanism that distorted perceived safety and contributed to cascading liquidations.
OKX founder and CEO Star Xu argues the October crash was not a random event or a sign of fundamental market failure, but the result of irresponsible yield campaigns that pushed traders into complex leverage loops they did not understand. He contends the risk began when traders were nudged into treating USDe like cash, swapping stablecoins into USDe for attractive yields, then using USDe as collateral to borrow more stablecoins, and repeating the cycle to amplify exposure. Xu notes that Binance users were encouraged to convert USDT and USDC into USDe to earn yields, without sufficient emphasis on the underlying risks.
From a user’s perspective, trading with USDe appeared no different from trading with traditional stablecoins, while the actual risk profile was materially higher. The market’s initial decline occurred roughly 30 minutes before the USDe depeg, suggesting the shock was market-related and not solely tied to the depeg event. Xu argues that without the USDe leverage loop, the market would likely have stabilized at that point, and the cascading liquidations were amplified by structural leverage.
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