Binance: “October crypto crash due to macro and liquidity factors… unrelated to us”

Binance, the world’s largest digital-asset (cryptocurrency) exchange, has issued an official statement on the sharp market crash that occurred on Oct. 10 last year, saying it was “the result of a combination of macroeconomic variables and structural market factors, not a system error.”

On the 30th (local time), Binance dismissed allegations of internal exchange faults raised by some and released a detailed analytical report on the market conditions at the time.

According to Binance’s statement, the Oct. 10 selloff was triggered by three factors: ▲a macro shock driven by trade-war headlines ▲risk-management protocols used by market makers ▲congestion on the Ethereum network.

Binance said, “Core infrastructure—including the exchange’s matching engine, risk controls, and liquidation systems—continued operating normally without interruption, and there were no system failures or downtime across the platform.”

It added that “as trade-war concerns froze investor sentiment, about $1.5 trillion evaporated from U.S. equities alone (S&P 500 and Nasdaq), rattling global asset markets,” and analyzed that “the crypto market was especially vulnerable because leverage had built up excessively, with Bitcoin futures and options open interest exceeding $100 billion following a rally that extended into early October.”

It continued, “As selling accelerated, market makers’ algorithms automatically withdrew liquidity, effectively acting as a ‘circuit breaker’,” and said that “this created a ‘liquidity gap’ in which buy orders disappeared at certain price levels, setting off a vicious cycle where forced liquidations drove prices down even more steeply.”

Overloads on the Ethereum network also amplified the turmoil. Surging gas fees (transaction fees) and delayed block times crippled inter-exchange fund transfers and arbitrage, Binance said, deepening price dislocations across venues and worsening liquidity shortages.

Binance drew a line regarding two internal technical issues that occurred during the crash, saying they were “not the cause of the market collapse.” It said that ▲delays in fund transfers between spot and futures wallets (about 33 minutes) ▲an error showing some users’ balances as “0” were merely issues with the interface (UI) or transmission layer, and did not affect actual trade matching or assets. As for index-calculation errors for certain tokens such as USDe and WBETH, it added that “the weighting of Binance order-book quotes was set excessively high,” and said it “strengthened hedging parameters to prevent recurrence.”

Meanwhile, Binance said it had completed compensation totaling $328 million (about 45 billion won) to affected users as of the 22nd in connection with the incident.