Ethereum News Today: Binance's Oracle Flaw Sparks $20B Crypto Meltdown as Ethena Defends USde

The cryptocurrency market is rebounding from a historic $20 billion liquidation event that rattled global markets last weekend, with Ethereum (ETH) leading the recovery as Bitcoin (BTC) stabilized near $115,000. The turmoil, triggered by U.S. President Donald Trump's surprise 100% tariff announcement on Chinese imports and software export controls, sent shockwaves through crypto and traditional markets alike. While Bitcoin dropped nearly 9% before clawing back gains, Ethereum's staking mechanisms and reduced leverage exposure helped cushion its decline, allowing it to rebound to $4,150 from Friday's lows near $3,700 .

The crisis exposed vulnerabilities in centralized exchange infrastructure, particularly at Binance, which faced scrutiny for a pricing flaw that exacerbated the collapse. Binance's use of internal order-book data-rather than external oracles-to value collateral during the crisis led to a localized depeg of its stablecoin USDe to $0.65, triggering cascading liquidations. Over $600 million in leveraged positions were wiped out, with Ethereum longs accounting for $235 million of the losses . Ethena Labs, the creator of USDe, defended its protocol, stating the depeg was caused by Binance's flawed oracle system and not by the stablecoin's underlying collateral .

The liquidation event marked one of the most severe deleveraging episodes in crypto history, with over 1.6 million traders affected in 24 hours. Bitcoin and Ethereum accounted for $5.38 billion and $4.43 billion in liquidations, respectively, while altcoins like Solana (SOL) and XRP also faced massive sell-offs . Analysts attributed the crisis to a combination of geopolitical tensions, overleveraged positions, and technical flaws in exchange pricing mechanisms. "This was a masterclass in exploiting an exchange's weakest structural link," said one industry observer, noting that the incident highlighted the fragility of crypto's interconnected markets .

Recovery efforts gained momentum as U.S.-China trade tensions eased over the weekend, with both sides signaling a willingness to de-escalate. Gold surged to a record $4,059.87 per ounce as investors flocked to safe-haven assets, while Bitcoin and Ethereum benefited from reduced short-term selling pressure. Bitwise's Jonathan Man noted that staking mechanisms, which lock 30% of ETH's supply, limited panic selling and prevented a full liquidity spiral . Meanwhile, Binance acknowledged "platform-related issues" and pledged $280 million in compensation for affected traders, though it emphasized it would not cover ordinary market losses .

Looking ahead, volatility is expected to persist as traders await the U.S. Federal Reserve's October policy decision. While institutional inflows into Bitcoin and Ethereum spot ETFs suggest long-term bullish sentiment, experts caution that macroeconomic risks-including trade tensions and potential security breaches-could reignite panic. The Hyperliquid wallet hack, which saw $21 million stolen, further underscored the need for robust security measures . Despite the chaos, some analysts view the crash as a necessary correction, potentially paving the way for a more resilient market. "This episode reminds investors to avoid overleveraging," said one fund manager, adding that long-term holders may see opportunities to accumulate at current levels .

Source: [1] Asia Morning Briefing: Ethereum Leads Recovery After $20B Liquidation Shock (https://www.coindesk.com/markets/2025/10/13/asia-morning-briefing-ethereum-leads-recovery-after-usd20b-liquidation-shock)

[2] Crypto Rally: Why Did Altcoins Go Back Up After the $20B ... (https://www.banklesstimes.com/articles/2025/10/12/crypto-rally-why-did-altcoins-go-back-up-after-the-20b-liquidations/)

[3] Crypto Carnage: Tariff Bombshell Triggers $200B ... (https://ts2.tech/en/crypto-carnage-tariff-bombshell-triggers-200b-crash-as-ethereum-leads-liquidation-bloodbath/)

[4] Trump's 100% China Tariff Triggers $20B Wipeout, ... (https://cryptonews.com/news/trumps-100-china-tariff-triggers-20b-wipeout-1-6m-crypto-traders-liquidated/)

[7] Did Binance Break USDe? Ethena Says It Was Never a Depeg (https://cointelegraph.com/news/usde-depeg-oracle-issues-ethena-founder)

[13] Donald Trump's China Tariff announcement wipes billions from ... (https://timesofindia.indiatimes.com/technology/tech-news/donald-trumps-china-tariff-announcement-wipes-billions-from-crypto-market-sees-biggest-ever-single-day-fall/articleshow/124497748.cms)