Binance pins crypto's worst-ever liquidation day on macro risks, not exchange failure

Binance blamed the October 10 flash crash on a macro shock colliding with heavy leverage and evaporating liquidity, rather than on any breakdown in its trading systems driven by speculative chatter on social media.

In a report released Saturday, the exchange said global markets were already under pressure following trade-war headlines when crypto markets cracked. Bitcoin and ether had rallied for months into early October, leaving traders heavily positioned and exposed.

At the time, open interest across bitcoin futures and options exceeded $100 billion, creating conditions ripe for forced deleveraging once prices started to fall, it said.

The selloff quickly fed on itself. As prices slid, market makers activated automated risk controls and reduced exposure, pulling liquidity from order books. Data cited by Binance, sourced from Kaiko, showed bid-side depth nearly vanished on several major exchanges during the peak of the move. With fewer resting orders, even small liquidations pushed prices sharply lower.

The disruption was not limited to crypto. U.S. equity markets lost an estimated $1.5 trillion that day, with the S&P 500 and Nasdaq posting their largest one-day drops in six months. Binance said roughly $150 billion in systemic liquidations occurred across global markets.

Blockchain congestion added to the strain. Ethereum gas fees (transaction fees someone pays for onchain activities) spiked above 100 gwei at times, slowing transfers and limiting arbitrage between venues. With capital unable to move quickly, price gaps widened and liquidity fragmented further.

Binance incidents that occurred

Binance acknowledged two platform-specific incidents during the crash but said neither caused the broader market move.

The first involved a slowdown in its internal asset-transfer system between 21:18 and 21:51 UTC, affecting transfers between spot, earn and futures accounts. Core trading systems remained operational, but some users temporarily saw zero balances displayed due to backend timeouts.

Binance said the issue stemmed from a database performance regression under surge traffic and has since been fixed. Affected users were compensated.

The second incident involved temporary index deviations for USDe, WBETH and BNSOL between 21:36 and 22:15 UTC, after most liquidations had already occurred. Binance said thin liquidity and delayed cross-venue rebalancing caused local price moves to disproportionately affect index calculations.

Methodology changes have since been implemented, and impacted users were compensated.

Binance said about 75% of the day’s liquidations occurred before the index deviations, suggesting the initial macro shock was the primary driver.

In total, the exchange said it compensated users with more than $328 million and launched additional support programs to stabilize participants affected by the crash.