Tom Lee: The sharp drop on October 11 was caused by an abnormal decline in USDE on a certain trading platform, triggering automatic liquidation.

According to Odaily Planet Daily, Tom Lee stated that the crypto market has a large number of automated processes, such as ADL (Automatic Deleveraging). This system triggers forced liquidation when the price of a user's account assets or collateral falls.

He pointed out that while USDE maintained its price at $1 on other trading platforms, its internal price on one particular platform plummeted to $0.65. Due to insufficient liquidity on that platform, the Automatic Debt Liability (ADL) mechanism was triggered, leading to the automatic liquidation of a large number of accounts. This chain reaction eventually spread throughout the market, resulting in the liquidation of tens of thousands of crypto accounts within minutes.

Tom Lee believes that this is essentially a systemic risk caused by a code vulnerability: the trading platform mistakenly relied on its internal pricing system to set stablecoin valuations instead of collecting cross-platform price data.

He further stated that the incident resulted in a significant reduction in the capital of market makers and trading institutions. When shrinking trading volume triggered a drop in cryptocurrency prices, these institutions needed more capital to maintain operations, thus being forced to further shrink their balance sheets and erode the market's foundation. He concluded that code inevitably contains vulnerabilities, and leverage is the real source of risk in the crypto market.