Binance blamed the Oct. 10 flash crash on a macro shock that collided with heavy leverage and evaporating liquidity, rather than any breakdown in its trading systems, following speculative chatter on social media.
In a report released on Saturday, the exchange said global markets were already under pressure following trade war headlines as crypto markets cracked. Bitcoin and ether had rallied for several months into early October, leaving traders heavily positioned and exposed.
At the time, open interest across bitcoin futures and options exceeded $100 billion, creating conditions ripe for forced deleveraging once prices began to fall, it said.
Sales quickly fell apart. As prices fell, market makers activated automated risk controls and reduced exposure, drawing liquidity from the order books. Data cited by Binance, sourced from Kaiko, showed that bid-side depth all but disappeared on several major exchanges during the peak of the move. With fewer resting orders, even small liquidations pushed prices down sharply.
The disruption was not limited to crypto. US stock markets lost an estimated $1.5 trillion on the day the S&P 500 and Nasdaq posted their biggest one-day declines in six months. Binance said around $150 billion in systemic liquidations took place across global markets.
Blockchain overload added to trunk. Ethereum gas fees rose above 100 gwei at times, slowing transfers and limiting arbitrage between venues. As capital was unable to move quickly, price differentials widened and liquidity fragmented further.
Binance events that occurred
Binance acknowledged two platform-specific incidents during the crash, but said neither caused the broader market move.
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.
Binance said the issue stemmed from a regression in database performance during surge traffic and has since been fixed. Affected users were compensated.
The second event involved temporary index deviations for USDe, WBETH and BNSOL between 21:36 and 22:15 UTC after most liquidations had already taken place. Binance said thin liquidity and delayed rebalancing across trading venues caused local price movements to disproportionately affect index calculations.
Methodological changes have since been implemented and affected users were compensated.
Binance said around 75% of the day’s liquidations occurred before the index deviations, pointing to the initial macro shock as the primary driver.
In total, the exchange said it compensated users with more than $328 million and launched additional support programs to stabilize participants affected by the outage.
