USDe Depeg on Binance Appears Linked to Internal Oracle Data, Ethena Founder Says

Ethena founder Guy Young said the USDe depegging event on Binance that sent the token to $0.65 was an isolated issue not tied to fundamentals.

Ethena’s founder, Guy Young, said the USDe synthetic dollar briefly depegged on Binance due to an internal oracle issue, not because of Ethena’s protocol or the underlying collateral. He emphasized that global minting and redeeming continued to function correctly during the flash crash.

USDe minting and redeeming worked “perfectly” during Friday’s event, Young said. He reported approximately $2 billion in USDe redeemed across exchanges including Curve, Fluid, and Uniswap within 24 hours, with price deviations generally limited to ~30 basis points on venues referencing deepest liquidity.

The price of USDe dropped from roughly $1 to $0.65 on Binance because the exchange used oracle data derived from its own orderbook, which had thinner liquidity at the time. Guy Young described the distortion as isolated to a single venue that referenced an on-exchange index rather than the deepest global liquidity pools.

Young added: “The severe price discrepancy was isolated to a single venue, which referenced the oracle index on its own orderbook, not the deepest pool of liquidity, and was facing deposit and withdrawal issues during the event, which did not allow market makers to close the loop.”

“No one would have been liquidated on any money market with oracles referencing the deepest pools of liquidity for USDe globally,” Young said.

The wider market crash triggered the largest 24-hour liquidation event on record, with cascading liquidations that reportedly wiped away about $20 billion in open leveraged positions. Traders and analysts say that figure may understate broader, off-exchange impacts.

What caused the USDe depeg on Binance?

The USDe depeg on Binance was caused by an exchange-specific oracle feed that referenced Binance’s own orderbook with thin liquidity, producing a localized price of $0.65. Global on-chain minting and redemption mechanics and Ethena’s collateral remained operational and largely unaffected.

How did the oracle issue trigger the depegging?

Binance’s Unified Account environment used internal orderbook data as the oracle source, creating an exploitable price divergence during stressed liquidity conditions. Market makers could not “close the loop” due to deposit and withdrawal frictions on that venue.

As a result, aggressive selling concentrated on Binance pushed the local price down while other venues maintained near‑peg levels within ~30 basis points. This mismatch propagated liquidations for participants using Binance’s feed as collateral reference.

Why do traders suspect a coordinated exploit?

Some traders, including the market participant known as ElonTrades (plain text), speculated the depeg was a coordinated attack. They argue attackers exploited the window before Binance announced it would switch to external oracles by October 14.

According to trader reports, up to $90 million of USDe was dumped on Binance, contributing to an on-exchange price collapse to $0.65. Simultaneously, attackers opened short positions on Bitcoin and Ether on other venues, reportedly netting roughly $192 million as contagion spread.

Frequently Asked Questions

Was Ethena’s collateral at fault for the USDe depeg?

No. According to Ethena founder Guy Young, the depeg on Binance was not caused by collateral failure. Global mint/redemption mechanics and collateral backing remained intact during the event.

Could a similar depeg happen elsewhere?

Yes, similar distortions can occur if an exchange uses thin local liquidity as an oracle. Using aggregated external oracle feeds referencing deep pools reduces this risk.

Key Takeaways

• Isolated Oracle Failure: Binance used on-exchange orderbook data, creating the price gap to $0.65.
• Protocol Resilience: Ethena’s mint/redemption worked and $2 billion in USDe was redeemed globally with minimal slippage.
• Systemic Risk: The event contributed to roughly $20 billion in market liquidations and highlighted oracle design and exchange liquidity risks.

Conclusion

The USDe depeg on Binance illustrates how exchange-specific oracle design and thin on-exchange liquidity can create severe, venue‑level price dislocations. Market participants should prioritize oracles that reference deepest global liquidity. COINOTAG will monitor official statements and on-chain metrics for updates.