TechFlow News, January 31: Star, CEO of OKX, posted on X stating, “The event of October 10 was triggered by irresponsible marketing campaigns conducted by certain companies. Hundreds of billions of dollars were liquidated. Many industry participants believe the damage was more severe than the FTX collapse. The root cause is not difficult to identify.
What Actually Happened
- Binance launched a temporary user-acquisition campaign offering a 12% annualized yield on USDe, while simultaneously allowing USDe to be used as collateral on equal footing with USDT and USDC—and without effective restrictions.
- Binance users were encouraged to convert USDT and USDC into USDe to earn attractive yields, but insufficient emphasis was placed on the associated risks. From the user’s perspective, trading with USDe appeared no different from trading with traditional stablecoins—yet the actual risk profile was significantly higher.
- Risk escalated further as users engaged in the following actions: • Converting USDT/USDC into USDe • Using USDe as collateral to borrow USDT • Converting the borrowed USDT back into USDe • And repeating this cycle
- This leveraged cycle generated artificial annualized yields of 24%, 36%, or even over 70%—widely perceived as “low-risk” solely because they were offered by major platforms. Systemic risk rapidly accumulated across global crypto markets.
- At that point, even a minor market shock was sufficient to trigger a collapse. When volatility hit, USDe quickly de-pegged. This triggered cascading liquidations, and weaknesses in risk management around assets such as WETH and BNSOL further amplified the crash. Some tokens briefly traded near zero. Losses were severe for global users and firms—including OKX customers—and recovery will take time.”
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