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

Core Insights - The October 10 flash crash in cryptocurrency markets was attributed to a macro shock combined with high leverage and reduced liquidity, rather than issues within Binance's trading systems [1] - Global markets were already under pressure from trade-war headlines, which contributed to the vulnerability of crypto markets [1] Market Conditions - At the time of the crash, open interest in bitcoin futures and options exceeded $100 billion, creating a scenario for forced deleveraging as prices began to decline [2] - The selloff led to a self-reinforcing cycle where market makers activated automated risk controls, further reducing liquidity in order books [3] Impact on Markets - The U.S. equity markets experienced a loss of approximately $1.5 trillion on the same day, with the S&P 500 and Nasdaq recording their largest one-day declines in six months [4] - Binance reported that around $150 billion in systemic liquidations occurred across global markets during the crash [4] Blockchain and Transaction Issues - Ethereum gas fees surged above 100 gwei, causing blockchain congestion that slowed transfers and limited arbitrage opportunities, which exacerbated price gaps and fragmented liquidity [5] Binance-Specific Incidents - Binance acknowledged two specific incidents during the crash but clarified that these did not cause the broader market movement. The first incident involved a slowdown in its internal asset-transfer system, affecting transfers between accounts [6] - The second incident was related to temporary index deviations for certain assets, which occurred after most liquidations had already taken place, attributed to thin liquidity and delayed rebalancing [7] Compensation and Methodology Changes - Binance implemented changes to its methodology and compensated affected users with over $328 million, launching additional support programs to stabilize impacted participants [8] - Approximately 75% of the day's liquidations occurred before the index deviations, indicating that the initial macro shock was the main driver of the market movement [8]