The collapse of the largest crypto exchange Binance: what caused the $19 billion losses

Saturday, October 11, 2025, will go down in the history of financial markets as the day when the cryptocurrency world experienced one of its largest internal collapses. In a matter of minutes, over $19 billion in market capitalization evaporated, and more than 1.6 million traders lost their assets due to automatic position closures. UNN investigated the cause of the crash.

At first glance, this catastrophe looked like a classic "black swan," triggered by a loud statement by Donald Trump about imposing new, harsh tariffs on Chinese imports. The macroeconomic shock indeed served as a trigger. But, as noted by specialized international media, the real and main reason was not a general market decline, but an architectural flaw in the system of the world's largest crypto exchange, Binance. This was not a failure of decentralized protocols, but a resounding failure of the illusion of security offered by centralized financial infrastructure.

Anatomy of the defect: how the exchange became "blind"

At the center of the accident was the "Unified Account" function of the Binance crypto exchange. This system allowed experienced traders to use a number of relatively new digital assets as collateral for trading with high leverage. In particular, these included tokens such as USDe, as well as staking-pegged tokens like wBETH and BnSOL.

According to fintech expert and co-founder of Concord Fintech Solutions Olena Sosedka, the main failure of the Binance crypto exchange, which cost billions, was in its internal pricing.

The exchange valued collateral for high-leverage trading based solely on its own internal prices on its spot market, completely ignoring external, independent data sources. These external sources, called oracles, such as Chainlink or Pyth, act as financial "news agencies" that aggregate the true, averaged price from around the world. By not using them, Binance made its system "blind" to manipulation.

Thus, the exchange created an ideal "vulnerability window": any exchange user who had enough capital to artificially "move" the price of one of these collateral coins only on the Binance spot market could trigger a chain reaction of billion-dollar liquidations.

And the most interesting thing is that the exchange knew about this problem. So, on October 6, Binance announced the transition to using oracles, but the implementation of this critically important correction was planned for October 14. It was this eight-day gap that allowed the attack to be launched.

Precise strike: $90 million as a trigger

On the night of October 10-11, when macro panic due to news of Chinese tariffs was already creating tension, unknown players delivered a precise, surgically accurate strike: they dumped about $90 million of USDe stablecoins exclusively on the Binance spot market. This volume proved sufficient to crash its internal price to a shocking $0.65. It is important to emphasize: on all other major platforms and in decentralized protocols, USDe remained stable, holding close to $1.

USDe is not to blame, its collateral remained full. The problem was exclusively in how Binance processed and determined its price.

Immediate and catastrophic consequences

Since Binance's system was "blind" and saw USDe at $0.65, it automatically concluded that users' collateral no longer covered their debts. The exchange's automatic algorithms launched massive forced liquidations, wiping out positions worth between $500 million and $1 billion. This cascading effect, multiplied by the panic from the Trump news, crashed the prices of Bitcoin, Ethereum, and other altcoins across the market, bringing total losses to $19 billion. At the same time, simultaneously with the crash, large short positions were opened on the Hyperliquid platform, which brought their owners profits that could reach $192 million. And although Binance stabilized prices five minutes later, the market was devastated.

Compensation and the main lesson

After the financial catastrophe in the cryptocurrency market, Binance management publicly acknowledged technical problems, apologized to users, and promised to compensate for losses caused by the direct depreciation of collateral.

We understand that recent market volatility and platform-related issues have affected some users, and we sincerely apologize for the inconvenience caused. We would like to inform the community about the price dependence of USDE, BNSOL, and WBETH. Binance has reviewed the incident and will compensate all affected futures, margin, and loan users within 72 hours. Compensation will be automatically distributed directly to the accounts of affected users.

The total amount of compensation paid to affected users reached $283 million. In addition, the exchange promptly implemented the use of external oracles and a minimum liquidation price mechanism.

The main lesson of October 11, 2025, for the entire crypto community is not the vulnerability of cryptocurrencies, but the danger of excessive centralization. When a single centralized structure, in this case, the Binance exchange, acts simultaneously as your bank, broker, price source, and judge, any defect in the code or manipulation in the internal market turns into a financial catastrophe of global proportions.

The loss of $19 billion, caused by $90 million in manipulation, proves: in crypto finance, the only path to true reliability is decentralization. Only external, independent oracles and transparent protocols that are not controlled by a single company can protect capital from internal architectural errors and coordinated attacks by manipulators.