- Analysts recently pinned the blame on Binance for supposedly amplifying Friday’s crypto flash crash, but one industry expert begs to differ.
US President Donald Trump’s added tariff and export control threats in response to China’s limit on exports of rare earths were undoubtedly the catalyst for the largest 24-hour crypto market crash last Friday. While it was an expected market reaction, as displayed by similar drops in key stock indices, its impact on crypto was way worse.
The downturn’s effects were notably exacerbated by widely leveraged positions that liquidated over $19.2 billion in trades, with Hyperliquid (HYPE) CEO Jeff Yan suggesting that the numbers could even be higher. Meanwhile, many others blamed the world’s largest crypto exchange, Binance, for its significant contribution to investors’ losses, particularly the flaws in its infrastructure.
Binance’s Alleged Role in the Crypto Flash Crash
Analyst identified an alleged failure in Binance’s unified margin oracle system as the prime culprit for the vast liquidations. They suggested that the platform priced certain collateral assets, like Ethena’s USDe synthetic dollar, Wrapped Beacon ETH (wBETH), and Binance Staked SOL (BNSOL), using the exchange’s own volatile order books instead of their underlying redemption values. This resulted in the mentioned collateral assets getting marked down in real-time, even though they traded normally on other exchanges.
The mispricing triggered a chain of forced liquidations in highly leveraged futures and margin accounts that utilized the mentioned assets. In addition, technical glitches, such as frozen accounts, API failures, and non-activation of stop-loss orders, amplified the pressure.
To quell its users, Binance announced a $400 million “Together Initiative” to help eligible users “restart their trading.” The platform will give qualified users around $300 million in USDC, and the remaining $100 million will come as a low-interest investment loan for ecosystem and institutional users.
Don’t Blame Binance and CZ, Says Crypto and Web3 Expert
Anton Golub, Chief Business Officer of Freedx and President of SwissAssetDAO, argued that it’s wrong to pin the blame solely on Binance. Despite its recent move, he opined that the exchange is under no obligation to refund users.
Golub firmly claimed the crash was due to leverage built on illiquid tokens. He said users lost their stop-loss protections the moment they chose to use “low-float garbage coins” as collateral.
“As they say: There is no crying at the casino,” the FreedX CBO reminded the crypto community.
Moreover, Golub defended Binance, saying people only attacked the company and its former CEO Changpeng “CZ” Zhao because they were easy targets. He pointed out that he didn’t see the same level of energy when Hyperliquid liquidated positions by over five times more than Binance.
Furthermore, Golub stated that Binance has high listing fees due to demand. After all, it’s the largest exchange on the planet.
Lastly, the Freedx official advised people to “never bet against CZ” of Binance because they survived every bullet the market has thrown at them. These include the 90% drawdown in 2018, FTX implosion, regulatory crackdowns, lawsuits, and even a prison term for Zhao. He referred to CZ as the “most resilient operator in crypto.”
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