Nearly four months after crypto’s record Oct. 10 flash crash wiped out leveraged positions across the market, the industry is still arguing over what actually broke.
That argument turned into a public row on Saturday after OKX founder and CEO Star Xu claimed the crash was neither complicated nor accidental, but the result of irresponsible dividend campaigns that pushed traders into leverage loops they didn’t understand.
On October 10, President Trump’s new tariff escalation on China rattled the macro markets and hit crypto at the worst moment. With leverage already stacked, the initial decline turned into a wipeout with about $19.16 billion in liquidations, including about $16 billion from long bets, as forced sales tumbled across venues.
Star’s core point was about USDe, a yield-bearing token issued by Athena. He described USDe as closer to a tokenized hedge fund strategy than a regular stablecoin. It is designed to generate returns through trading and hedging strategies, and then send those returns back to holders.
“No complexity. No accident. 10/10 was caused by irresponsible marketing campaigns by certain companies. On October 10, tens of billions of dollars were liquidated. As CEO of OKX, we clearly observed that the microstructure of the crypto market fundamentally changed after that day. Many industry participants believe that the damage was more serious than the FTX collapse. Since then, there has been an extensive discussion about why it has been a relapse. reasons are not difficult to identify,” Xu said.
Star argued that the risk began when traders were pressured to treat USDe as cash. In his narrative, users were encouraged to exchange stablecoins for USDe for attractive returns, then use USDe as collateral to borrow more stablecoins, convert them to USDe again, and repeat the cycle. The loop created a self-feeding leverage machine that made the yield look more certain than it was.
“Binance users were encouraged to convert USDT and USDC into USDe to obtain attractive returns without sufficient emphasis on the underlying risks,” he said. “From a user’s perspective, trading USDe seemed no different than trading traditional stablecoins – while the actual risk profile was significantly higher.”
When volatility hit, Star said, that structure wouldn’t need a big trigger to unwind. He argued that the cascade helped turn a selloff into a wipeout and left lasting damage across exchanges and users.
“BTC started falling about 30 minutes before the USDe divergence. This exactly supports the previous point: the initial move was a market shock. Without the USDe leverage loop, the market would probably have stabilized by then. The cascading liquidations were not inevitable – they were reinforced by structural leverage, as explained earlier,” he said.
Others in the market pushed back on Star’s tweets.
Dragonfly partner Haseeb Qureshi called Star’s story “ridiculous” and said it tries to force a pure villain onto an event that doesn’t fit a simple narrative. He argued that the crash did not unfold like a classic stablecoin blowup that spreads everywhere at once.
If a single token error really drove the day, he said, the stress would have shown up broadly and in sync across venues.
“The USDe price diverged ONLY on Binance, it didn’t diverge on other venues,” he said. “But the liquidation spiral was happening everywhere. So if the USDe “depeg” didn’t propagate across the market, that can’t explain how *every single exchange* saw huge wipeouts.”
With all due respect to Star, this story is patently ridiculous.
Star is trying to claim that the root cause of the 10/10 was that Binance created an Athena dividend campaign, causing USDe to be overshadowed from traders looping it on Binance, which eventually wound down due to a small… pic.twitter.com/7YX529JAjN
— Haseeb ＞|＜ (@hosseeb) 31 January 2026
Qureshi’s alternative explanation is that macro headlines simply spooked an already lifted market. The liquidations began when liquidity quickly retreated.
Once that cycle starts, he said, it becomes reflexive. Foreclosures drive lower prices, which triggers more foreclosures, with few natural buyers willing to step in amid chaos.
Earlier in the day, Binance attributed the Oct. 10 crash to a macro-driven selloff that collided with heavy leverage and disappearing liquidity, denying claims of a failure in the central trading system that CoinDesk reported.
Late Friday, CZ quoted Qureshi with a sharper line that aimed as much at motive as mechanics. “Dragonfly is/was one of the biggest investors in OKX,” CZ wrote, adding, “Data speaks. Time doesn’t match. Good to see people getting facts.”
However, Star rejected CZ’s characterization of Dragonfly’s relationship with OKX.
“Dragonfly has never been an investor in OKX,” he wrote, adding that OKX invested in Dragonfly before Qureshi joined the firm and that a partner’s previous fund, not Dragonfly, had invested in OKX.
He added that the details are “separate and easily verifiable” and he would not engage further.
Not everyone buys the idea of a single villain. Some market observers say the selloff was simpler and driven by excessive leverage and weak underlying demand rather than one platform or product.
“Markets crashed because the industry was handed alts and macro revealed that there was no sustainable organic bid for it,” Seraphim Czecker, former head of growth at Athena Labs, said on X.
