"The recent crash on Oct. 10 was the largest liquidation event in the crypto market's history. More than $19 B was liquidated, according to CoinGlass data, leading to a $65 B decline in open interest. This number dwarfs other memorable liquidation cascades such as the COVID-19 crash with $1.2 B, or even the FTX collapse at $1.6 B in liquidations."
"In the aftermath, consensus among investigators emerged that the event was at least partially caused by vulnerable pricing oracles on the Binance exchange. The collateral value of three pegged crypto tokens, namely USDE, bnSOL and wBETH, was determined from Binance's internal orderbook data instead of an external oracle. This puts users of the Unified Accounts feature at risk of liquidation during market irregularities."
"It is possible that this vulnerability was exploited in a coordinated attack on Oct. 10, but the evidence remains inconclusive. USDE, in particular, contributed to cascading liquidations with an approximate volume of $346 M, compared to wBETH with $169 M and bnSOL with $77 M. The mass withdrawal of buy-side liquidity on a stablecoin pair should be considered especially suspicious."
"Using exclusively obtained, granular data from our partners at the AI-driven market analytics firm Rena Labs, Cointelegraph Research dissects the unusual activity on the USDE/USDT trading pair in this article. A Mass Liquidity Meltdown Rena's anomaly detection engine recorded one of the sharpest and most complex market dislocations ever seen in stablecoin trading. This is surprising given there were no concerns about the soundness of USDE's collateral, unlike in the previous UST and USDC depegs. Mints and redemptions of USDE continued to operate as usual. Nonetheless, professional market makers withdrew liquidity from the pair on a massive scale. Some of this can be attributed to automated risk-scoring systems, which initiated defensive quote withdrawals to limit exposure."
The Oct. 10 crash triggered the largest liquidation event in crypto history, with more than $19 billion liquidated and a $65 billion decline in open interest. Vulnerable pricing oracles on Binance used internal orderbook data to value collateral for USDE, bnSOL and wBETH, exposing Unified Accounts users to liquidation risk during market irregularities. USDE accounted for roughly $346 million in cascading liquidations, wBETH $169 million and bnSOL $77 million. Massive buy-side liquidity withdrawals on a stablecoin pair were particularly suspicious. Rena Labs’ anomaly engine recorded an extreme stablecoin dislocation as market makers and automated risk systems withdrew quotes.
Read at cointelegraph.com
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