It has been several months since the large liquidation event on October 10th, yet opinions on its cause still vary within the industry. Recently, this debate reignited when the founder and CEO of a major exchange publicly expressed his stance.

He argued that the core issue behind the crash was the leverage risk caused by irresponsible marketing of a specific project. In particular, he mentioned Ethena’s USDe, a revenue-generating token, explaining that it was not just a simple stablecoin but more akin to a complex hedge fund strategy. The problem started when traders were encouraged to treat USDe like cash. Users exchanged stablecoins for USDe, then borrowed more stablecoins against it, and converted back to USDe in a circular loop. This self-reinforcing leverage mechanism made the risk appear much safer than it actually was, ultimately causing the leverage risk to explode.

When President Trump announced tariffs early on October 10th, shaking the macroeconomic markets, the accumulated leverage led to about $19.1 billion in liquidations. He claimed that USDe began to depeg within just about 30 minutes, and if this leverage loop hadn’t existed, the market might have stabilized at that point.

However, there is another perspective. A partner at an investment firm challenged this explanation, saying it was hard to accept. He pointed out that the USDe depeg phenomenon only appeared on certain exchanges, with no discrepancy elsewhere. So how could a large-scale liquidation happen simultaneously across all exchanges? His argument was that macroeconomic headlines had already overly leveraged the market, and as liquidity rapidly dried up, liquidations began. Once that cycle started, it operated reflexively, with forced selling pushing prices down and triggering more forced sales in a vicious cycle.

One major exchange explained in an official statement that the flash crash resulted from a collision of macroeconomic factors, excessive leverage, and rapidly disappearing liquidity. Later, a former executive of that exchange cited the investment firm partner’s opinion but pointed out that the timing didn’t match, adding a sharp comment and mentioning concerns about investment relationships.

Among market observers, some do not accept the idea of a single villain. Some see this crash as part of a broader phenomenon stemming from excessive leverage and weak underlying demand. Ultimately, this incident serves as a case showing how leverage risk can impact the entire system.

Recently, XRP has been rallying due to strong trading volume and whale fund inflows, but it remains in a broad downtrend, with no clear signs of a reversal. Meanwhile, a major Japanese payment app’s decision to integrate XRP is seen as a meaningful step forward in real-world adoption.