Market Maker CEO Challenges Binance Blame
Evgeny Gaevoy, who runs the algorithmic trading firm Wintermute, has stepped into the ongoing debate about what caused last October’s massive crypto market crash. He’s pushing back against claims from other industry leaders who pointed fingers at Binance.
Gaevoy seems frustrated with how public figures are talking about this. He wrote something that caught my attention: “Kind of wish public figures would pick words more carefully.” That’s a pretty direct criticism coming from someone who deals with market mechanics every day.
He doesn’t buy the “software glitch” explanation that’s been floating around. Instead, he describes it as “a flash crash on a mega leveraged market on illiquid Friday night driven by macro news.” That’s a specific, technical view that contrasts with some of the more dramatic narratives.
The USDe Leverage Loop Problem
The real controversy centers around something called $USDe. OKX CEO Star Xu has been particularly vocal about this. He claims Binance ran a promotion offering 12% APY on $USDe while treating it as collateral just like established stablecoins USDT and USDC.
Here’s where things get messy, I think. According to Xu, users started creating what he calls “leverage loops.” They’d convert USDT into USDe, use that as collateral to borrow more USDT, then convert that back into USDe again. This cycle apparently created artificial APYs that sometimes exceeded 70%.
When volatility hit the market, USDe lost its peg dramatically. On Binance, it traded as low as $0.65 while staying closer to $1 on other exchanges. The cascading liquidations that followed wiped out around $19 billion in leveraged positions, maybe more.
Different Perspectives on Responsibility
Binance co-founder Yi He responded with what feels like a cryptic comment: “Whales who trade on Binance know better what actually happens when the tide goes out.” She also suggested that ARK Invest’s Cathie Wood, who linked the crash to a Binance software glitch, wasn’t qualified to comment as a non-user.
That last part was in a now-deleted post, which is interesting in itself. Why delete it? Maybe she reconsidered, or perhaps there was internal discussion about the tone.
Binance has since issued its most detailed statement on the matter. They point to macro shocks, market maker risk protocols, and Ethereum network congestion as contributing factors. They maintain their core infrastructure worked throughout, though they acknowledge interface display errors showed some balances as “zero” without affecting actual trades.
The Aftermath and Compensation
What’s notable is the compensation effort. Binance has paid out $328 million to affected users, expanding from an initial $283 million announced right after the crash. That’s a significant amount, though whether it covers all losses is another question.
Xu from OKX says the damage was more severe than people realize and recovery will take time. He also expects his company to face “significant misinformation attacks and coordinated FUD” for speaking out. That’s a serious claim that shows how tense things are behind the scenes.
Many people point to President Trump’s announcement about 100% tariffs on Chinese imports as the actual catalyst. Bitcoin and Ethereum prices dipped significantly, setting off panic trading. But the leverage situation with USDe seems to have amplified everything.
This whole situation reveals how complex crypto markets have become. It’s not just about price movements anymore—it’s about intricate financial products, leverage mechanisms, and how different platforms handle risk. The debate continues, and I suspect we haven’t heard the last of it.
