As $1 billion in redemptions rippled through the market, Ethena Labs insists its synthetic dollar, USDe, worked exactly as designed and that Binance’s own pricing systems triggered the meltdown.
This weekend’s market saga affected all crypto sectors, with stablecoins also caught in the crosshairs following a supposed glitch at the world’s largest exchange.
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Ethena Defends Against $1 Billion Binance Meltdown
In a detailed post on X (Twitter), Ethena founder Guy Young pushed back against claims of a USDe Depeg. He says the protocol’s minting, redemption, and collateral functions operated normally throughout the market crash.
“Ethena’s mint and redeem function had zero downtime… [the protocol processed] more than $1 billion in withdrawals in a few hours and $2 billion in a 24-hour period with zero issues,” Young said.
According to Young, the chaos stemmed from a single venue, the Binance exchange, whose internal oracle index diverged from the deepest pools of on-chain liquidity.
The exchange’s orderbook began referencing its own spot prices instead of broader market data, and USDe’s quoted value briefly collapsed. Market makers, unable to arbitrage due to exchange lag and deposit freezes, were sidelined as automated liquidations rippled through Binance’s unified collateral system.
Analyst Pavel Altukhov, who called it a perfect storm, alleged that Binance’s unified account setup allows all assets to be used as collateral. When prices of USDe and other assets like wBETH dropped, traders faced forced sales to maintain margin, amplifying sell pressure across the platform.
“Traders had to cover negative PnL and meet new margin requirements, while their USDe did only half the job due to the depeg,” Altukhov wrote.
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Meanwhile, other analysts questioned whether the event was a coordinated manipulation or a technical misfire. Analyst ElonTrades claimed someone intentionally exploited Binance’s internal price feeds, knowing that the system used those prices to calculate collateral values.
For the layperson, when USDe’s price briefly fell on Binance, many DeFi money markets (like Curve, Fluid, and others) used a “hardcoded” peg. This means they treated USDe as equal to USDT or USDC (1:1) for collateral and lending purposes.
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So even though Binance’s internal price feed showed USDe dipping below $1, DeFi protocols ignored that temporary drop because they were referencing a fixed peg or deep on-chain liquidity pools, not Binance’s internal orderbook data.
Tether CEO Paolo Ardoino rode on the rhetoric to advocate USDT as the choice collateral for derivatives and margin trading.
“USDT is the best collateral for derivatives and margin trading. Liquid, tested by fire. If you use low liquidity tokens, such as bananas, a horse, three olives, and chewed bubble gum as collateral, then brace yourself when the market moves,” he wrote.
Ethena Turns to Transparency and Oracle Reform After the Chaos
In response, Ethena has released detailed guidance for Oracle design and risk management. The USDe stablecoin issuer emphasizes the need to distinguish between “temporary dislocation” and “permanent impairment” of collateral.
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The team also offers real-time proof-of-reserves (PoR) access to exchanges and oracle providers. This includes Chaos Labs and Chainlink, to enable on-demand verification of USDe’s backing.
Industry voices largely welcomed that transparency push. Researcher Wang Xiaolou said Ethena’s approach “makes sense.” The analyst argues that pegging USDe to USDT in DeFi markets during volatility helps avoid unnecessary liquidations. At the same time, PoR-based triggers can address true impairment if it ever occurs.
Still, some analysts remain cautious, including Duo Nine, who warned that while DeFi money markets escaped unscathed this time.
“USDe lost peg on Binance after the crash was over. This was Binance-related, and DeFi escaped thanks to the hardcoded peg to USDT. Next time, the panic may start in DeFi, and redemption speed won’t help. USDe remains a high-risk asset,” the analyst wrote.
Claims articulate that Ethena’s system did not break, and that the venue (Binance) did. However, the incident exposes a deeper structural issue. Centralized exchange data feeds can ignite systemic stress across an increasingly interlinked CeFi-DeFi playing field.