On Friday, Oct. 10, the crypto market yet again showed<\/a> how quickly it can take a sharp turn, with crypto exchanges reporting around $20 billion in leveraged positions liquidated<\/a> in just a few hours \u2014 the largest single-day liquidation event the industry has seen to date.<\/p>\n In the ensuing chaos across markets, decentralized finance (DeFi) protocols experienced a major stress test, and largely came out unscathed \u2014 with most of the largest protocols seeing zero outages, and very few user-reported issues, especially when compared with their centralized counterparts. <\/p>\n On Friday evening, following reports that U.S. President Donald Trump had imposed 100% tariffs on imports from China, Bitcoin<\/a> dropped more than 10% from above $120,000, briefly dipping under $103,000 on some exchanges before rebounding, while many altcoins plunged even further in short squeezes, and most assets seeing double-digit losses.<\/p>\n Ethereum (ETH) crashed below $4,000, and XRP hit its lowest price since November of last year. Total market cap plunged more than 15% in hours, going from above $4.2 trillion to about $3.5 trillion.<\/p>\n Markets have since recovered much of their losses, with total market cap inching back up to $3.97 trillion by press time, BTC back over $114,000, and ETH around $4,100. But traders and other industry participants \u2014 especially those trading with leverage, over 1.6 million of whom were liquidated on Friday \u2014 are continuing to analyze and discuss what happened, how the top platforms performed, and what comes next for markets. <\/p>\n In the market crash and aftermath, a lot of the drama centered around the largest centralized exchange (CEX), Binance<\/a>, as well USDe, Ethena\u2019s U.S.-dollar tied token, which showed<\/a> a jaw-dropping drop on the exchange to as low as $0.6567.<\/p>\n But on other platforms, especially Curve Finance<\/a> pools, USDe stayed close to its $1.00 price peg, a mismatch that made some believe the drop was caused by Binance\u2019s own technical setup. Critics reported pricing feeds lagging and market makers going offline, saying this could leave the CEX\u2019s order book out of sync with the broader market.<\/p>\n However, in a blog post on Saturday, Oct. 12, Binance distanced<\/a> itself from those accusations, saying instead that the exchange\u2019s core futures and spot matching engines and API trading \u201cremained operational.\u201d<\/p>\n The exchange also added that the forced liquidation volume processed by the platform accounted for a \u201crelatively low proportion to the total trading volume, indicating that this volatility was mainly driven by overall market conditions.\u201d<\/p>\n Binance also said that it compensated users who were liquidated as a result of the depegging of USDe and two other assets on the exchange \u2014 as they held those assets as collateral for their leveraged trades and loans \u2014 paying out a total of $283 million to users, though The Defiant was unable to independently verify those figures. <\/p>\n Many remained unconvinced<\/a>, however, pointing to inconsistencies in the blog post, unclear timelines, vague technical explanations, and missing data on liquidations and compensation.<\/p>\n Meanwhile, DeFi protocols faced their own pressure tests as liquidity thinned and collateral values swung wildly. Aave, the largest lending protocol with over $42 billion in total value locked (TVL) per DefiLlama<\/a>, experienced \u201cthe largest stress test\u201d of its lending infrastructure, Aave founder Stani Kulechov wrote in an X post<\/a> on the evening of Oct. 10.<\/p>\n \u201cThe protocol operated flawlessly, automatically liquidating a record $180M worth of collateral in just one hour, without any human intervention,\u201d Kulechov added.<\/p>\n Hyperliquid, the largest decentralized perpetuals exchange by trading volumes, also weathered the volatility with \u201c100% uptime with zero bad debt,\u201d according to founder and CEO Jeff Yan, who said in an X post<\/a> on Saturday that the event was the DEX\u2019s first cross-margin auto-deleveraging (ADL) \u2014 an automated risk management mechanism for leverage trading \u2014 in the more than two years it\u2019s been operating. <\/p>\n After explaining Hyperliquid\u2019s operations in the first 20 minutes of the crash, when billions of dollars in leveraged positions on the DEX were liquidated, Yan argued that \u201cOn other venues, the liquidation engine is not transparent and therefore may not be subject to the same strict margin requirements as for normal users.\u201d <\/p>\n However, Hyperliquid rival Lighter, which last week surpassed its competitor<\/a> in daily volumes, ran into trouble during the crash. The team behind the DEX reported that its database struggled under heavy traffic, and experienced a 4.5-hour outage on Friday night.<\/p>\n After the market mayhem, the team acknowledged in an X thread<\/a> that shortly after the exchange\u2019s own mainnet debut on Oct. 1, the team realized that its database resources would \u201clikely struggle with the growth that will come from the launch,\u201d and had plans to upgrade them, but that the DEX also \u201cheld up during the worst of the market moves and only gave up 4-5 hours later.\u201d<\/p>\n The team also shared user loss<\/a> numbers and promised compensation, reporting that 2,008 traders lost over $1,000, while 367 lost more than $10,000, and 38 lost over $100,000.<\/p>\n Morpho, another large lending protocol with more than $7 billion in TVL, reported no major issues, with co-founder Merlin Egalite in an X post<\/a> on Oct. 11 calling the event \u201cone of the largest tests DeFi has seen in recent memory\u201d and stating that the protocol \u201ccontinues to operate as designed.\u201d However, some users reported having difficulties<\/a> accessing their orders due to what Egalite described<\/a> as a \u201cwallet RPC\u201d problem.<\/p>\n In commentary to The Defiant, Sam MacPherson, core contributor behind Spark, a DeFi protocol in the Sky ecosystem with over $9.6 billion in TVL, revealed in commentary to The Defiant that Spark\u2019s protocols, including DeFi\u2019s third-largest lending protocol, SparkLend, operated normally in the market crash. <\/p>\n MacPherson said that deposits in Sky’s USDS stablecoin \u201cremain at $8B total with $3.2B in stablecoins available for instant redemption.\u201d<\/p>\n The Spark core contributor also noted that \u201cexposure of the balance sheet is as vanilla as it gets, with the majority of outstanding loans against BTC, ETH, and LSTs,\u201d adding that \u201cbeing in the industry so long, these sorts of events are routine over a several-year time frame.\u201d<\/p>\n People are still debating who or what is really to blame for the crash and the resulting massive wave of liquidations as rumors and reports continue to circulate on X and other social platforms.<\/p>\n Some public figures are pointing fingers at the biggest centralized exchanges, saying they might be downplaying the numbers, which could mean the real scale of liquidations was much larger than what was publicly disclosed and reported on platforms like Coinglass.<\/p>\n Meanwhile, across DeFi, liquidity took a big hit, dropping about 11%, or $20 billion, from Friday to Saturday.<\/p>\n Shawn Young, chief analyst of MEXC Research, told The Defiant that the forceful unwinding \u201cremoved a substantial layer of speculative exposure, effectively cleansing the system and setting the tone for a more sustainable uptrend movement.\u201d<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":" As crypto markets saw record liquidations in Friday\u2019s market plunge, top DeFi protocols like Aave, Hyperliquid, and Morpho faced major pressure \u2014 and held up under it. On Friday, Oct. 10, the crypto market yet again showed how quickly it can take a sharp turn, with crypto exchanges reporting around $20 billion in leveraged positions […]<\/p>\n","protected":false},"author":2,"featured_media":407959,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[274,273,272,244,266,271,268,270,269,267],"class_list":["post-407958","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-de-fi","tag-crypto-finance","tag-decentralized-finance","tag-liquidity","tag-metamask","tag-pancake","tag-slippage","tag-sushiswap","tag-tronlink","tag-trust-wallet","tag-uniswap"],"_links":{"self":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts\/407958","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/comments?post=407958"}],"version-history":[{"count":1,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts\/407958\/revisions"}],"predecessor-version":[{"id":407960,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts\/407958\/revisions\/407960"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/media\/407959"}],"wp:attachment":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/media?parent=407958"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/categories?post=407958"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/tags?post=407958"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}What Happened with Binance and Ethena\u2019s USDe?<\/h2>\n
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How Did DeFi Fare in the Chaos?<\/h2>\n
Questions Remain<\/h2>\n
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