TL;DR
- On October 10, the crypto market lost nearly $500 billion in market capitalization, and Ethena’s USDe temporarily depegged on Binance.
- Ethena confirmed that its stablecoin remained overcollateralized and clarified that the underlying positions generated profits during the volatility.
- The de-pegging on Binance was mainly due to the use of internal exchange prices as an oracle.
On Friday, October 10, the crypto market experienced a crash that erased nearly half a trillion dollars from its total market capitalization. During the sell-off, Ethena’s “synthetic dollar,” USDe, temporarily depegged on Binance, dropping to around $0.65, while traders with leveraged positions suffered over $19 billion in liquidations.
USDe Serve as collateral on centralized exchanges and on-chain protocols. Unlike stablecoins such as USDT or USDC, which are backed 1:1 by real-world assets, this stablecoin is supported by delta-neutral positions of crypto assets. During the volatility spikes, Ethena published an out-of-schedule proof of reserves and confirmed that its stablecoin remained overcollateralized, noting that the underlying positions generated gains that reinforced its collateralization.
Why Did USDe De-peg?
The de-pegging on Binance occurred mainly due to the use of internal exchange prices as an oracle. As collateral was sold off, the price of USDe dropped further, triggering additional liquidations of USDe-backed positions.
The company acknowledged the temporary de-pegging of USDE, BNSOL, and WBETH, clarifying that it was a consequence, not the cause, of the market volatility. Binance reimbursed affected users with around $283 million and attributed extreme price movements in certain altcoins to long-standing limit orders executed in low-liquidity conditions.
Outside of Binance, the de-pegging of WBETH did trigger liquidations on BNB Chain’s Venus Protocol, where the platform committed to reimbursing users who incurred losses during a 40-minute window.
Despite the magnitude of the volatility and its impact on the market, Binance’s rapid response and compensation, along with the resilience demonstrated on other on-chain platforms, highlight the importance of having robust protection and transparency mechanisms in place
