Recently, a war of words erupted among some of the most powerful figures in the cryptocurrency industry, with the focus of debate revolving around the cause of the '1011 Flash Crash' event on October 11, 2025 (UTC+8). This 'flash crash' triggered over $19 billion in leveraged position liquidations within 24 hours, setting the record for the largest single-day drop in cryptocurrency history, with over 16,000 trading accounts completely destroyed in the incident. The scale of market losses is shocking and has become a litmus test for measuring the maturity of the crypto industry.
Recently, Ark Invest CEO 'Wood Sister' Cathie Wood and OKX CEO Star successively commented on the '1011 Flash Crash', reigniting the crypto community. Many pointed fingers at the world's largest cryptocurrency exchange Binance, putting Binance in the spotlight. The leadership at Binance actively responded, characterizing the incident as a natural (albeit severe) market adjustment caused by macroeconomic shocks, rather than an internal programming error.
'1011 flash crash' brief recap.
The event occurred from October 10 to 11, 2025, as global financial turmoil intensified. U.S. President Trump threatened to impose '100% tariffs' on China again, amid escalating U.S.-China trade tensions, traditional markets suffered a severe downturn—the S&P 500 and Nasdaq indices recorded their largest single-day drops in nearly six months, with about 1.5 trillion USD evaporated from the U.S. stock market. The crypto space, due to previously record-high leverage, exacerbated the pain, triggering a chain reaction where Bitcoin plummeted by 12,000 USD in just a few minutes, falling nearly 10%, almost breaching the 100,000 mark.
Bitcoin derivative open interest has exceeded 100 billion USD, nearing historical peaks, while on-chain data shows that most holders are in profit, preparing for rapid deleveraging. As selling intensified, market makers activated risk controls and withdrew liquidity, creating a vacuum that exacerbated price volatility. Ethereum network congestion caused gas fees to soar above 100 gwei, delaying transfers and arbitrage, further diluting the order book.
The consequences are staggering! Over 19 billion USD in positions were liquidated across exchanges, affecting millions of traders. Bitcoin ultimately plunged by as much as 14%, while altcoins fell even more. Stablecoin assets, including USDe from Ethena, decoupled significantly on Binance, dropping to 0.65 USD before rebounding. Critics argue that this decoupling is related to Binance promoting USDe as a high-yield collateral, exacerbating chain liquidations. Subsequently, the total cryptocurrency market value fell by over 20%, hovering around 3.2 trillion USD.
The controversy flared up again, with Binance pushed into the spotlight.
In a Fox Business interview on January 26, 2026, Ark Investment CEO Cathie Wood referred again to the collapse, as a staunch Bitcoin bull, Wood called it a 'forced deleveraging event' that caused the entire system to evaporate about 28 billion USD. Wood described the incident as a 'software failure on Binance' which artificially led to system deleveraging, expressing that the market currently struggles to return to historical highs precisely because the event damaged investor confidence. She stated, 'On October 10, in the world of cryptocurrency... this flash crash was related to a software failure at Binance, which caused the system to deleverage.'
Executives from competitors also joined the fray. OKX CEO Star stated directly in a January 31 post on X that the '1011 flash crash' event was caused by irresponsible marketing activities by certain companies.
He stated, 'On October 10, tens of billions of dollars were liquidated. As CEO of OKX, we clearly observed that the microstructure of the cryptocurrency market fundamentally changed afterward. Many industry participants believe that the damage was more severe than the FTX collapse. Since then, discussions on why it happened and how to prevent it from happening again have been very extensive. The root causes are not difficult to identify.'
In a post on X, Star analyzed the USDe wealth management product that Binance was promoting at the time, pointing out the high-risk issues associated with USDe.
He criticized Binance for actively promoting USDe with a 12% annual yield, viewing it as collateral equivalent to stablecoins like USDT. He believes this encourages a high-risk leveraged cycle—converting USDT to USDe, borrowing more, and repeating—raising artificial yields to 70%, while downplaying the inherent hedge fund-level risks of the Ethena product, stating that even a small market shock is enough to trigger a collapse. So when volatility hit, USDe quickly decoupled. Then came the chain liquidation, and the risk management weaknesses around assets like WETH and BNSOL further amplified the collapse. Some tokens came close to zero.
But Star emphasized at the end, 'I am discussing the root causes, not blaming or attacking Binance. Publicly discussing systemic risks can sometimes be uncomfortable, but it is necessary for the industry to mature responsibly,' and stated, 'As the largest global platform, Binance has significant influence—and the responsibility that comes with being an industry leader. The long-term trust in cryptocurrency cannot be built on short-term profit games, excessive leverage, or marketing practices that obscure risks. The industry needs to prioritize market stability, transparency, and responsible innovation.'
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 observed clearly that the crypto market’s microstructure fundamentally changed after that day.… pic.twitter.com/N1VlY4F7rt
-- Star (@star_okx) January 31, 2026
Analysis of the 28 billion USD collapse.
The '1011 flash crash' event remains the most significant deleveraging incident since the collapse of FTX in 2022. During the period of extreme volatility, the prices of certain collateral assets on the Binance platform—particularly liquid staking tokens in the 'Unified Margin' component—deviated severely from global spot prices.
Traders reported that the automatic liquidation engine was triggered too early, causing a 'death spiral': forced selling drove prices down, which in turn triggered more liquidations. At the lowest point, Bitcoin fell nearly 15% in a few minutes before rebounding, leading to thousands of accounts showing 'negative balances' and sparking debates on whether Binance's infrastructure should be held accountable.
Binance's response and subsequent measures.
Binance has consistently claimed that major macro shocks are the primary cause. In an official blog post, Binance stated that the main drivers of the market turmoil on October 11, 2025, included macroeconomic shocks, market makers' risk control mechanisms, and Ethereum network congestion.
Although some viewpoints attribute this market volatility to Binance's system issues, in fact, chain liquidations were primarily triggered by high-leverage positions under macro risk impacts, combined with market makers' risk control measures contracting liquidity, and Ethereum network congestion causing delays in fund transfers.
During the market fluctuations, Binance's core systems remained operational, with no overall platform outages occurring, and all core matching, risk checks, and liquidation functions continued to execute stably without interruption.
Binance also detailed the two failures, which were about a 33-minute delay in asset transfers and a temporary index deviation of USDe, WBETH, and BNSOL during periods of low liquidity. Due to excessive traffic, a 33-minute delay occurred in the exchange’s asset transfer subsystem, and there were temporary deviations in the indices of USDe, WBETH, and BNSOL under conditions of insufficient liquidity and on-chain delays, but emphasized that 'individual issues on the Binance platform were not the cause of this market flash crash.' However, Binance stressed that 75% of liquidations occurred before these issues arose, and Binance's core matching engine, risk verification, and liquidation systems remained stable throughout the process.
It is noteworthy that Binance quickly took responsive measures after discovering these two failures.
Binance stated that it has compensated all eligible users affected during the event from 05:18 to 05:51 (UTC+8) based on system logs and actual operation records. To address this event, the platform has increased caching, expanded database capacity and replicas, optimized connection management, isolated key functions, and strengthened the front-end UI display mechanism. Additionally, parameters were tightened in subsequent market stabilization phases, and updates to the designs of the three tokens USDe, WBETH, and BNSOL were immediately initiated, with all affected users to receive appropriate compensation.
Binance emphasized measures for transparency and user primacy, stating that as of October 22, 2025, the exchange had compensated affected users with over 328 million USD and launched a 300 million USD 'Together We Thrive' industry recovery fund, as well as providing a 100 million USD low-interest loan for ecosystem participants. Binance stated in its initial announcement, 'The event was driven by broader market conditions, not a failure on our platform.'
CZ's latest explanation.
As one of the most influential and representative figures in the crypto industry, Zhao Changpeng (CZ) responded in a recent AMA to some of the community's recent controversies regarding Binance and himself. He dismissed these narratives as 'distorted FUD' and emphasized Binance's resilience.
Zhao Changpeng responded to the backlash, calling the accusations against Binance for causing the collapse 'strained' and asserting that simplifying complex market events to a single platform's responsibility is too one-sided. He dismissed these claims as 'distorted FUD' (Fear, Uncertainty, and Doubt), reiterating that Binance has compensated users, and urged people to focus on long-term industry development rather than mutual blame, stating that 'collaborative attacks cannot build this space.'
He also defended his 'buy and hold' philosophy, responding to claims online about his net worth of over 90 billion USD being merely a Forbes estimate, not actual cash. He stated he has never sold large amounts of crypto assets, has not cashed out, and does not intend to hold fiat (including stablecoins), nor will he make money by 'selling user assets.'
"The blame of multiple parties sparked ongoing market turmoil, Binance refutes the '1011 flash crash' controversy" This article was first published on (Blockcast).