Binance to Compensate Users After Record Market Collapse Driven by Technical Glitch

Binance to Compensate Users After Market's Record Collapse

Binance, the world's leading cryptocurrency exchange, has announced a voluntary compensation initiative for users who suffered losses during a catastrophic market downturn on October 10-11. The incident, characterized by a record wave of liquidations, has prompted the exchange to meticulously review affected accounts and analyze each case individually. This proactive step aims to restore user confidence following a tumultuous period.

Technical Glitch Amidst Peak Load Identified as Root Cause

Yi He, co-founder of Binance, clarified on the social platform X that the significant user losses stemmed from a critical technical malfunction within the system during periods of peak operational load. This failure led to substantial delays in order execution, creating a domino effect across the market. She urged affected individuals to reach out to customer support to initiate their compensation claims. "We will conduct a phased review of your account activity, perform an analysis, and make a decision regarding compensation. This process will take some time. However, losses arising from general market volatility, as well as unrealized profits, are not eligible for compensation," He elaborated, emphasizing the exchange's commitment to accountability.

"Binance always takes responsibility for its actions and will continue to work on enhancing platform reliability."

In the wake of the incident, Binance swiftly updated its asset valuation methodology within 24 hours. Moving away from simple spot quotations, the exchange now employs a model based on a conversion ratio, designed to more accurately reflect the actual quantity of underlying assets. This adjustment is crucial for maintaining market stability and providing more reliable pricing information to traders.

Stablecoin De-Pegging and Cascading Liquidations Fuel Market Turmoil

The market chaos unfolded against the backdrop of a brief de-pegging event for stablecoins FDUSD and USDT, triggered by an acute liquidity crunch. During this heightened market tension, three specific tokens – wrapped Beacon Ether (wBETH), Binance Staked SOL (BNSOL), and the synthetic dollar USDe – lost their crucial ties to their underlying assets. According to Binance representatives, this de-pegging was the primary catalyst for the cascading liquidations observed in the futures market. The inability of arbitrageurs to effectively hedge their positions or synchronize prices with the spot market exacerbated the situation. For instance, wBETH’s price plummeted by nearly 88%, falling to approximately $430, while Ether (ETH) was trading above $3,800. BNSOL dropped to $34.90, and USDe briefly dipped to $0.65, illustrating the severity of the asset de-valuations.

Expert Analysis: Binance's Technical Flaw Amplified Market Panic

Industry experts believe that Binance's technical glitch significantly amplified market panic and accelerated the downward spiral. YQ Jia, founder of AltLayer, commented on X, stating, "Binance likely accounts for about 50% of global spot volume. When market makers were unable to access Binance – neither to hedge positions nor even to re-evaluate prices – they were essentially operating blind." This reliance on Binance as a central hub meant that any disruption at the exchange had far-reaching consequences for the entire cryptocurrency ecosystem.

Record Liquidation Event Shakes Crypto Landscape

This unprecedented event occurred against a backdrop of optimistic market forecasts. In the early hours of October 11th, the cryptocurrency market experienced a historic collapse, marked by a staggering wave of liquidations. Within a single 24-hour period, positions valued at nearly $20 billion were forcibly closed. Tragically, over 1.6 million traders saw their assets wiped out due to this extreme market volatility and the technical failures that exacerbated it. The incident serves as a stark reminder of the inherent risks in the volatile world of digital assets and the critical importance of robust and reliable trading infrastructure.