TLDR
- Over $19B in crypto positions were liquidated in the October 10 crash.
- Binance used internal orderbook data instead of external pricing oracles.
- USDE lost its peg on Binance, dropping to $0.68 during the liquidity crash.
- Rena Labs detected 28 trading anomalies before the USDE market collapse.
Newly obtained forensic orderbook data from Rena Labs, shared with Cointelegraph Research, reveals fresh details about the October 10 crypto crash—the largest liquidation event in digital asset history. More than $19 billion in positions were liquidated as a cascade of forced sales swept through the market. Vulnerable pricing oracles on Binance, relying on internal orderbook data, contributed to the rapid devaluation of tokens such as USDE, bnSOL, and wBETH.
Oracle Vulnerability and Market Reaction
Investigators have pointed to an issue in Binance’s pricing system that used internal orderbook data for collateral valuation instead of independent oracles. This approach exposed users of the Unified Accounts feature to liquidation risks during periods of market stress. USDE played a major role in the event, accounting for around $346 million in liquidations, while wBETH and bnSOL followed with $169 million and $77 million respectively.
Although there is no confirmed evidence of foul play, experts suggest that the vulnerability could have been exploited. The sudden removal of buy-side liquidity on a stablecoin pair like USDE/USDT was unusual. This pattern raised questions about whether certain traders took advantage of the fragile pricing system during the broader market decline.
Liquidity Collapse on Binance
According to Rena Labs’ data, the USDE/USDT pair experienced one of the steepest liquidity drops ever recorded. Before the crash, the pair maintained an average liquidity of $89 million. Between 21:40 and 21:55 UTC, that figure fell sharply to $23 million and then collapsed to only $2 million within minutes. Market makers rapidly withdrew orders, leaving the orderbook almost empty.
The sudden exit of liquidity providers widened bid-ask spreads to 22%. As a result, USDE’s price fell to $0.68 on Binance, while it remained stable near its peg on other exchanges. Trading activity spiked dramatically—volume increased by nearly 900 times and trade frequency reached 3,000 orders per minute. Approximately 92% of these trades were sell orders triggered by forced liquidations, stop losses, and panic selling.
Early Warning Signs and Anomalies
Rena Labs’ anomaly detection engine registered abnormal trading activity well before the liquidity collapse. Around 21:00 UTC, it recorded 28 anomalies, four times more than usual. These anomalies included irregular trade patterns, unusual bursts in activity, and order sequences consistent with spoofing behavior.
Three separate volleys of large orders appeared before the crisis fully unfolded. These orders came after Bitcoin began to decline on major exchanges but before USDE’s liquidity vanished. The timing suggested that certain traders may have anticipated or influenced the rapid liquidity withdrawal that followed.
Market Fragility and Structural Weakness
The event exposed how dependent many digital assets remain on large market makers for stability. When liquidity providers withdrew, several tokens showed little organic demand to support their prices. During the crash, some altcoins dropped by more than 99% as cascading liquidations erased market depth.
Rena Labs’ data shows that structural weaknesses persist across many trading pairs, especially for tokens without strong market support. The USDE episode demonstrated how reliance on internal pricing systems and limited liquidity can trigger severe volatility, even without any fundamental issues in a token’s underlying collateral.
