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Binance has released a detailed analysis defending its role in the October 10 crypto market crash, attributing the sell-off to macro turbulence and extreme leverage rather than platform failures.
The world’s largest crypto exchange said more than $100 billion in open bitcoin derivatives and vanishing liquidity created a “powder keg” that ignited when broader markets retreated, ultimately forcing Binance to compensate users with over $328 million.
Bitcoin and ether had rallied steadily through late summer and into early October, pushing traders deeper into leveraged futures and options positions. By the time prices began to slip, open interest across bitcoin derivatives had climbed beyond $100 billion, according to Binance data.
That leverage created a powder keg. Once selling pressure emerged, forced liquidations accelerated the crypto flash crash as automated risk systems closed positions en masse.
“The market was structurally exposed,” Binance said, noting that even modest price declines were enough to trigger cascading liquidations across centralized and decentralized venues.
As prices fell, liquidity conditions deteriorated rapidly. Market makers activated automated risk controls and reduced exposure, pulling bids from order books at precisely the wrong moment.
Data cited by Binance from market analytics firm Kaiko showed bid-side depth nearly evaporated on several major exchanges during the peak of the crypto flash crash. With few resting orders available, even relatively small liquidations caused outsized price moves.
This feedback loop—lower prices triggering liquidations, which then pushed prices even lower—turned what might have been a controlled correction into a disorderly plunge.
Binance stressed that crypto was not alone in the turmoil. On the same day as the crypto flash crash, U.S. equity markets suffered heavy losses, wiping out an estimated $1.5 trillion in value.
The S&P 500 and Nasdaq posted their largest one-day declines in roughly six months, reflecting a broader global retreat from risk. Binance estimated that total systemic liquidations across global markets reached approximately $150 billion, reinforcing the idea that crypto’s collapse was part of a wider macro shock.
On-chain conditions added further strain. As volatility surged, Ethereum network activity spiked, driving gas fees above 100 gwei at times. Elevated fees slowed transfers and constrained arbitrage activity between exchanges.
With capital unable to move efficiently, price gaps widened across venues, fragmenting liquidity and intensifying the crypto flash crash. Binance said this breakdown in cross-market connectivity allowed localized price swings to propagate more aggressively.
Binance acknowledged experiencing two platform-specific incidents during the market chaos but said neither caused the broader collapse.
The first issue involved a slowdown in Binance’s internal asset-transfer system between 21:18 and 21:51 UTC. Transfers between spot, earn, and futures accounts were temporarily affected, and some users briefly saw zero balances due to backend timeouts. Core trading systems remained operational throughout.
Binance attributed the issue to a database performance regression triggered by surge traffic and said the problem has since been fixed. Impacted users were compensated.
A second incident involved temporary index price deviations for USDe, WBETH, and BNSOL between 21:36 and 22:15 UTC. Binance said thin liquidity and delayed cross-venue rebalancing allowed local price movements to disproportionately influence index calculations.
Crucially, Binance stated that about 75% of all liquidations tied to the crypto flash crash had already occurred before these deviations appeared.
“By the time index pricing was affected, the bulk of forced deleveraging was already behind us,” the exchange said.
In total, Binance said it compensated users with more than $328 million following the crypto flash crash and launched additional support programs to stabilize affected traders.
The exchange also implemented changes to index calculation methodologies and internal monitoring systems, aiming to reduce vulnerability during future volatility spikes.
Market analysts say the episode highlights how quickly liquidity can disappear in heavily leveraged environments. Data from Kaiko underscores that even the largest exchanges are exposed when macro stress, leverage, and automation collide.
For Binance, the conclusion is clear: October 10 was not a systems failure but a stark reminder of how fragile crypto markets can become under pressure. As leverage rebuilds and global risks persist, the exchange warned that another crypto flash crash remains a real possibility.
