OKX CEO Star Xu argues that Ethena's USDe stablecoin, combined with Binance's leverage loop mechanics (borrowing USDT against USDe to mint more USDe), was a primary driver of the "1010" crash liquidation cascade.
DeFi & Yields ·
OKX founder and CEO Star Xu has raised concerns about Ethena's USDe stablecoin and its role in recent market turmoil. On the New Era Finance Podcast, Xu characterized USDe as effectively a "tokenized hedge fund" rather than a conventional stablecoin, arguing that delta-neutral strategies do not eliminate risk despite their design intent.
Xu pointed to a specific mechanical vulnerability in how Binance enabled leverage loops around USDe. The exchange allowed users to borrow USDT collateralized by USDe, convert that USDT into additional USDe, and repeat the cycle to amplify yields. This recursive borrowing structure compounded leverage exposure across the ecosystem, according to Xu's analysis.
In Xu's assessment, this leverage loop architecture was instrumental in triggering the cascading liquidations during the "1010" crash and constituted a material risk-control failure by the exchange. However, the degree to which USDe mechanics versus other market factors drove the liquidation cascade remains debated, and no independent audit of the crash's causal chain has been published.