Evgeny Gaevoy, the founder of Wintermute, recently came to the defense of Binance amid accusations from notable industry figures like Cathie Wood of ARK Invest and Star Xu, CEO of OKX. These individuals suggested that Binance”s actions were a primary cause of the significant market crash on October 10, which resulted in approximately $19 billion being wiped out in leveraged positions.
Gaevoy expressed his concerns regarding the terminology used by these public figures, stating, “Kind of wish public figures would pick words more carefully.” He pushed back against the notion that the event was the result of a “software glitch,” asserting instead that it was a flash crash linked to a highly leveraged market compounded by macroeconomic news on a Friday night.
In a pointed critique, Xu blamed Binance for promoting the conversion of stablecoins into USDe, which he referred to as a “tokenized hedge fund.” He noted that Binance had launched a temporary user-acquisition initiative that offered a 12% annual percentage yield (APY) on USDe while permitting it to be used as collateral without proper risk disclosures. Xu argued that this led to users creating leverage loops that inflated APYs to unsustainable levels, thereby heightening systemic risk.
As volatility increased, USDe lost its peg, trading at $0.65 on Binance, while remaining closer to $1 on other exchanges. Xu emphasized the extensive damage incurred by users and firms, including OKX, suggesting that recovery may take considerable time. He remarked on the necessity of discussing systemic risks, despite the discomfort it may induce.
In response, Binance co-founder Yi He critiqued the claims made by Wood, suggesting her lack of direct experience with the platform disqualified her commentary. Wood had previously claimed that the leveraging event eradicated about $28 billion from the market. Many observers have pointed to a significant announcement by former President Trump about potential tariffs on Chinese imports as a catalyst for the crash.
Following the incident, Binance provided a detailed statement attributing the crash to macroeconomic shocks, market maker risk protocols, and congestion on the Ethereum network. They clarified that their core infrastructure remained functional throughout and that interface display errors did not impact actual trade execution. Subsequently, Binance has distributed $328 million in compensation to affected users, a figure that expanded from an initial $283 million payout announced shortly after the crash.
The ongoing debate highlights the complexities and risks inherent in cryptocurrency trading, particularly in leveraged environments. As the industry continues to evolve, discussions about risk management and transparency will remain critical in fostering a more mature market.
