Last Friday, the cryptocurrency market experienced an "epic liquidation" event with a collective crash across digital assets. During this period, Binance, the world's largest cryptocurrency exchange, faced widespread user criticism due to alleged "system downtime incidents."
Responding to social media accusations of "pulling the plug at critical moments," Binance issued a statement on Monday, October 13th. The exchange acknowledged technical issues on its platform while emphasizing that the market collapse was primarily driven by macroeconomic factors rather than systemic platform failures.
Binance stated that "some platform modules experienced brief technical malfunctions" and "certain assets experienced depegging issues due to extreme market volatility." However, the platform maintained that its core spot and futures matching engines, as well as API trading functions, remained operational throughout the incident.
Following a comprehensive review, Binance confirmed that during the event, the platform's core spot and futures matching engines and API trading functions continued to operate normally. Data shows that the proportion of forced liquidations processed by Binance relative to total trading volume was relatively low, indicating that the volatility was primarily driven by overall market conditions.
Binance also disclosed that it completed compensation for users who suffered losses due to asset depegging issues within 24 hours of the incident, with two batches of compensation totaling approximately $283 million.
The market turmoil began last Friday, reportedly triggered by tariff threat statements posted by former President Trump on social media. Bitcoin prices fell 13.5% from highs above $126,000, creating widespread devastation across cryptocurrency markets within hours. At the time when markets needed liquidity most, numerous users reported experiencing system delays, failed order executions, and even frozen accounts on trading platforms including Binance, leading to amplified losses.
**"Targeted Attack" Speculation and Asset Depegging: Binance Claims Market Drop Preceded Asset Depegging**
Despite Binance's official explanation, market speculation about a "targeted attack" on the exchange has gained significant attention.
Conflux Network executive Forgiven posted on social media suggesting the incident might have been a coordinated attack on Binance's Unified Margin system, which allows users to use multiple assets as collateral.
This theory suggests attackers may have exploited this mechanism by concentrating pressure on assets widely used as collateral on Binance, including USDe, BNSOL, and WBETH, causing their collateral value to collapse and triggering massive chain liquidations. Data shows that stablecoin USDe's price on Binance fell to $0.65 at one point, while maintaining around $0.90 on other platforms during the same period.
Binance refuted this in its announcement, stating that asset depegging was not the cause of the market crash, and that the market decline occurred before asset depegging.
According to their records, market prices reached their lowest point between 21:20 and 21:21 UTC, while severe asset depegging occurred after 21:36 that day. Nevertheless, Binance stated it has "taken responsibility and fully compensated losses" for users who were liquidated due to holding these depegged assets as collateral.
**Technical Explanation for "Flash Crash to Zero"**
Another concerning phenomenon during this event was the instant "flash crash to zero" followed by rapid recovery of tokens like ATOM and IOTX on Binance, leading some users to allege market manipulation.
Binance provided technical explanations for this occurrence. The announcement identified two main reasons: First, due to unilateral liquidity depletion (lack of buy orders), sell orders continued executing, eventually triggering some "historical limit orders" on the platform, some dating back to 2019, whose extremely low prices caused instant token price crashes.
Second, regarding "zero price" displays for certain trading pairs (such as IOTX/USDT), Binance attributed this to a user interface (UI) display issue caused by the platform's recent reduction in effective decimal places for minimum price movements, clarifying that token prices did not actually reach zero. Binance promised to optimize and correct the relevant displays.
Regardless of underlying causes, as the world's largest cryptocurrency exchange, Binance has become the focal point of user criticism during this incident. Numerous users claimed to have experienced account freezes, ineffective stop-loss orders, and other issues during the market crash.
Critics have called for regulatory intervention and investigation, marking another instance where Binance faces allegations related to similar incidents.
Social media platforms were flooded with user complaints expressing dissatisfaction with Binance's performance during the crisis.