USDe Depeg on Binance Blamed on Internal Oracle Error, Not Ethena Protocol Fault

The synthetic dollar USDe briefly lost its dollar peg on Binance during Friday’s market crash, plunging as low as $0.65. However, the event was caused by an internal oracle malfunction, not by issues with the Ethena protocol or its collateral, according to Guy Young, founder of Ethena Labs.

Young clarified that USDe’s core mechanisms functioned as intended, noting that minting and redemptions continued smoothly throughout the crash. “USDe minting and redeeming worked perfectly during the event,” he said, adding that $2 billion worth of USDe was redeemed across exchanges such as Curve, Fluid, and Uniswap within 24 hours, with price deviations of less than 30 basis points.

Binance Oracle Mispricing Caused Localized USDe Depeg

Young explained that the depeg was isolated to Binance because the exchange relied on its own orderbook data rather than external oracles referencing deeper liquidity pools. “The severe price discrepancy was isolated to a single venue, which referenced the oracle index on its own orderbook, not the deepest pool of liquidity,” he said.

Liquidity issues on Binance during the event prevented market makers from correcting the price, amplifying the deviation. Importantly, no users were liquidated on lending platforms or markets using verified external oracles, Young emphasized.

The flash crash, triggered by renewed U.S.–China tariff tensions, caused widespread chaos across crypto markets, resulting in the largest 24-hour liquidation event in history, wiping out over $20 billion in leveraged positions.

Exploit Speculation and Coordinated Short Attack

Crypto trader ElonTrades suggested that the Binance USDe depeg may have been part of a coordinated exploit targeting the exchange’s Unified Account system — a feature allowing users to post assets like USDe as collateral. This system relies on Binance’s internal orderbook data, which ElonTrades described as a “major vulnerability.”

According to his analysis, attackers dumped about $90 million in USDe on Binance, driving the price down to $0.65 while simultaneously opening short positions on Bitcoin and Ether via the Hyperliquid decentralized exchange. 

When President Donald Trump’s tariff announcement sparked panic selling, prices collapsed further, allowing the attackers to net approximately $192 million in profit.

The fallout led to calls for greater transparency. Crypto.com CEO Kris Marszalek urged authorities to investigate exchanges that suffered major losses during the event, saying the coordinated nature of the crash raised “serious systemic questions” about market integrity.

While Binance has yet to issue a full report, the exchange confirmed that by October 14, it will transition its Unified Account feature to external oracle pricing to prevent similar incidents in the future.