A brand new report from Wu Blockchain means that the October 11 crypto market crash might not have been a random sell-off, however a coordinated exploit that took benefit of a vulnerability in Binance’s Unified Account margin system.
Abstract
- Wu Blockchain says Oct 11 crash could also be premeditated exploit on Binance margin.
- USDE, wBETH, BnSOL depegged to $0.65, $0.20, $0.13 throughout excessive volatility.
- Binance system let yield cash function collateral, amplifying liquidations.
In keeping with journalist Wu Blockchain, attackers seem to have manipulated sure collateral property on Binance — inflicting them to crash in worth — which then triggered mass liquidations throughout the trade.
The assault focused USDE, wBETH, and BnSOL, which noticed excessive depegging, with USDE falling to $0.65, wBETH to $0.20, and BnSOL to $0.13.
The timing coincided exactly with a window between Binance’s October 6 announcement of an oracle value adjustment and its scheduled implementation on October 14. This supplied attackers with a transparent alternative.
The 24-hour spot buying and selling quantity for the three affected property reached $3.5-4 billion on Binance, with estimated realized losses between $500 million and $1 billion that the trade might have to cowl.
Unified margin design amplified cascade liquidations
The vulnerability stemmed from Binance permitting PoS derivatives and yield-bearing stablecoins as unified margin collateral, with liquidation costs derived from Binance’s personal spot order e book somewhat than hard-pegged values.
Whereas BUSD remained hard-pegged and Aave oracle knowledge for USDE stayed at 1:1 on-chain, stopping large-scale liquidations elsewhere, Binance’s inside pricing mechanism created remoted vulnerability.
As Bitcoin (BTC) and altcoins fell sharply, derivatives merchants confronted mounting losses. For coin-margined positions, declining coin costs mixed with extreme collateral depegging additional eroded margin values.
Market makers utilizing these property as margin had been pressured to shut all positions and liquidate holdings, amplifying the downward strain.
USDE confronted extra promoting from Binance’s 12% yield program, which inspired giant stablecoin holders to have interaction in recursive borrowing, magnifying harm from the focused assault.
USDE spot costs on Binance plunged far under ranges on different centralized exchanges, most of which stayed above $0.90.
Equally, some altcoin native lows on Binance fell considerably under different exchanges, doubtless linked to pressured liquidations by main market makers.
Structural dangers echo LUNA-UST collapse
Investor Mindaoyang famous parallels between this crash and the LUNA collapse. Each incidents occurred when main exchanges accepted “non-fiat” stablecoins as high-collateral property.
Essentially the most harmful mixture entails market-fed pricing with excessive collateral ratios, particularly when centralized exchanges have low arbitrage effectivity.
Wu Blockchain’s evaluation recommended that liquidation oracles for PoS-based native property ought to keep arduous flooring costs somewhat than counting on spot order e book pricing.
Tom Lee of BitMine famous that the market pullback might have been overdue after a 36% acquire since April. The VIX concern index surged 29%, marking the 51st most important single-day transfer in historical past and rating among the many high 1% of utmost occasions.
