Facing doubts after the "historic-level liquidation" in the currency circle on Friday, Binance stated in a statement that "some platform modules experienced temporary technical failures and some assets were decoupled."

Written by: Long Yue

Source: Wall Street Insights

Last Friday, the currency circle experienced an "epic liquidation" and a collective plunge in cryptocurrencies. During this period, Binance, the world's largest cryptocurrency exchange, encountered widespread doubts from users due to the "outage incident".

Facing accusations of "unplugging the network cable at critical moments" on social media, Binance issued a statement on Monday, October 13, in response. It admitted that there were technical problems on the platform, but also emphasized that the market collapse was mainly driven by the macro environment rather than systemic failures on the platform.

Binance said that "some platform modules temporarily experienced technical glitches" and that "certain assets experienced decoupling issues due to severe market volatility." However, the platform insists that its core spot and futures matching engines and API trading functions have always remained operational.

Binance has conducted a comprehensive review and can currently confirm that the platform’s core spot and futures matching engine and API trading functions remained normal during this incident. Data shows that the forced liquidation volume handled by the Binance platform accounts for a relatively low proportion of the total trading volume, indicating that this fluctuation is mainly driven by the overall market conditions.

Binance also disclosed that it had completed compensation to users who suffered losses due to the asset decoupling issue within 24 hours after the incident. The two batches of compensation totaled approximately US$283 million.

The market turmoil began last Friday, with reports that U.S. President Trump's tariff threats posted on social media were seen as the trigger. Bitcoin prices fell 13.5% from a high of over $126,000 within hours, sending the cryptocurrency market reeling. When the market needed liquidity the most, a large number of users reported that they encountered system delays, orders could not be executed, and even accounts were frozen on trading platforms such as Binance, leading to increased losses.

The suspicion of "fixed-point attack" is related to the decoupling of assets. Binance: The big fall comes first, and the decoupling of assets comes later.

Although Binance gave an official explanation, the market's talk of a "targeted attack" against the exchange has gained a lot of attention.

Wall Street News wrote that Conflux Network executive Forgiven posted on social platforms that the incident may be a coordinated attack on Binance’s Unified Margin system. The system allows users to use a mix of assets as margin.

The theory is that attackers may have taken advantage of this mechanism to focus on suppressing the prices of assets such as USDe, BNSOL, and WBETH that are widely used as margins on Binance, causing the value of their collateral to collapse, thereby triggering a large-scale chain of forced liquidations. Data shows that the price of the stablecoin USDe on Binance once fell to $0.65, while the price on other platforms remained around $0.90 during the same period.

In response, Binance countered in the announcement that asset decoupling was not the cause of the market crash, and that the market crash occurred before asset decoupling.

Its records show that the lowest point in the market price occurred between 21:20 and 21:21 UTC time, while the severe asset decoupling occurred after 21:36 that day. Nonetheless, Binance said it has “taken responsibility and fully reimbursed their losses” for users who were liquidated for holding these decoupled assets as collateral.

Technical explanation of "flash crash to zero"

In this incident, another phenomenon that disturbed users was that tokens such as ATOM and IOTX rebounded quickly after their prices instantly "flashed back to zero" on Binance. This prompted accusations of market manipulation from some users.

Binance also gave a technical explanation for this. The announcement pointed out that there are two main reasons: First, due to the depletion of unilateral liquidity in the market (lack of buy orders), sell orders continued to be executed, eventually triggering some "historic limit orders" on the platform. Some of the orders were set up as far back as 2019, and their extremely low prices caused the token price to plummet instantly.

Secondly, for the "zero price" display on some trading pairs (such as IOTX/USDT), Binance said that this is a user interface (UI) display problem. The reason is that the platform has recently reduced the number of effective decimal places for the minimum price change, and it does not mean that the token price has really returned to zero. Binance promises to optimize and correct the relevant display.

Regardless of the reasons behind it, as the world's largest cryptocurrency exchange, Binance has become the focus of user criticism in this crisis. A large number of users claimed to have encountered problems such as account freezes and stop-loss orders becoming invalid during the market crash.

Wall Street Insight wrote that critics have called on regulators to intervene in the investigation, and this is not the first time Binance has faced accusations over similar incidents.

Picture: Social media is flooded with complaints from users dissatisfied with Binance

Disclaimer: The views in this article only represent the author's personal views and do not constitute investment advice from this platform. This platform does not make any guarantees about the accuracy, completeness, originality and timeliness of the information in the article, nor is it responsible for any losses caused by the use or reliance of the information in the article.