Wintermute founder rejects claim Binance caused Oct. 10 flash crash, cites leverage and macro shock
Wintermute founder Evgeny Gaevoy dismissed assertions that Binance caused the October 10, 2025 crypto flash crash, calling attempts to blame a single exchange “intellectually dishonest.” Gaevoy said the event was a flash crash driven by macro news (US tariffs on China) hitting an overleveraged market during illiquid Friday-night hours, which amplified liquidations as few market makers were active. His comments were a rebuttal to OKX CEO Star Xu, who argued Binance’s promotion of USDe with high yields and allowing USDe as collateral produced a leverage loop: users converted stablecoins into USDe to earn advertised yields, used USDe as collateral to borrow back stablecoins, and repeated the cycle—creating artificial APYs reportedly reaching 24%–70% and systemic risk. Xu said the resulting depeg and cascading liquidations led to tens of billions in losses and fundamentally changed crypto market microstructure. Gaevoy urged focus on market structure and leverage rather than finding a single scapegoat. Key figures: Evgeny Gaevoy (Wintermute), Star Xu (OKX), and Binance; key themes: leverage loops, USDe promotion, depeg risk, illiquidity during off-hours, and large-scale liquidations. Primary keywords: October flash crash, Binance, leverage loop, USDe, liquidations. Secondary/semantic keywords: macro shock, depeg, market microstructure, overleveraged positions.
Neutral
The net market impact is neutral because the article records disagreement among major industry participants about cause rather than new actionable policy or a fresh operational failure. Gaevoy’s rebuttal shifts narrative away from blaming a single exchange toward systemic issues—overleverage, off-hours illiquidity and macro shocks—which are structural and already priced into risk premia by many traders. Short-term effects: renewed scrutiny of stablecoin-like products (USDe) and leverage products could raise volatility in related tokens and exchanges, prompting tighter risk controls and temporary outflows from high-yield promotions. Traders may reduce leverage and widen spreads, causing short-term bearish pressure on high-leverage venues and tokens mentioned. Long-term effects: markets may respond with improved risk management, clearer collateral rules, and product disclosures, which can restore confidence and be neutral-to-bullish over time. Historical parallels: the event resembles past cascade liquidations (e.g., March 2020 COVID drawdown, May 2022 LUNA/UST collapse) where leverage plus liquidity stress amplified losses; however, unlike a platform insolvency (FTX 2022), this episode centers on market microstructure. For traders: monitor funding rates, exchange collateral policies, USDe or similar product flows, and on-chain liquidation metrics. Trade adjustments: lower leveraged positions, tighten stop-losses around correlated assets (WETH, SOL-related tokens), and watch order-book depth during off-hours.