Tom Lee: "October 11 Crash" May Cause Market to Lame Along, Exchange Pricing Flaw Triggers Chain of Automatic Liquidations

Odaily News Tom Lee, Chairman of the Board of Ethereum treasury company Bitmine, stated during a podcast this Friday that the current bear market was triggered by the largest deleveraging event in crypto history that occurred last October. Its impact is even greater than the FTX collapse. The cause was a pricing flaw at an exchange that triggered a chain of automatic liquidations, resulting in over 2 million accounts being liquidated globally, one-third of market makers being wiped out, and exchange balance sheets being severely damaged. This led to the entire ecosystem "limping along." He believes the selling pressure is not yet fully over, and recovery, similar to 2022, may take 8-12 weeks, but clear rebound signals have not yet been observed.

Previously, OKX CEO Star posted on X, pointing out that tens of billions of dollars in cryptocurrency were liquidated on October 11th. OKX observed a fundamental change in the microstructure of the cryptocurrency market since that day. Industry insiders believe the losses from this event were more severe than the FTX collapse. The root cause of the event was Binance launching a limited-time campaign offering a 12% annualized yield for USDe and allowing it to be used as collateral with virtually no limits. USDe is essentially a tokenized hedge fund product, structurally different from low-risk money market funds like BlackRock's BUIDL. Binance encouraged users to swap USDT and USDC for USDe to earn yield but did not adequately emphasize the risks. Users engaged in circular borrowing, using USDe as collateral to borrow USDT and swap again, artificially creating an annualized yield premium of 24% to over 70%, leading to a rapid accumulation of systemic risk. When market volatility triggered USDe's depeg, the chain of liquidations exacerbated the crash of assets like WETH and BNSOL. Star noted that industry trust cannot be built on short-term yield gambling or marketing that obscures risks, and Binance, as an industry leader, should bear corresponding responsibility.