WuBlockchain
OKX founder and CEO Star Xu argued that Binance's promotion of Ethena's USDe helped create the conditions for the "1010" crash. He described USDe as a "tokenized hedge fund" and said its delta-neutral strategy should not be treated as risk-free.
Why it matters
Xu said users could borrow USDT against USDe, convert the borrowed funds into more USDe, and repeat the process to increase yield. That structure can stack leverage while leaving users exposed to liquidation pressure if the underlying assumptions or collateral values weaken.
The criticism focuses on risk controls rather than the label of stablecoin. A delta-neutral strategy may reduce directional exposure, but it does not eliminate leverage, liquidity, counterparty, or liquidation risk.
Market impact
Xu attributed a major part of the cascading liquidations during the "1010" crash to this leverage loop. His argument puts Binance's collateral and borrowing design, as well as Ethena's USDe risk framework, under scrutiny as DeFi platforms compete to offer higher yields.
Source: [Star Xu: Why This Crypto Cycle Will Change Your Life — YouTube](https://www.youtube.com/watch?v=DDGT1a_dEJ4)
Frequently asked questions
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What leverage loop did Star Xu describe?
Users could borrow USDT against USDe, convert the borrowed funds into more USDe, and repeat the process to increase yield and leverage.
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Why did Xu call USDe a tokenized hedge fund?
Xu argued that USDe relies on a delta-neutral strategy and should be viewed as carrying risks similar to a leveraged investment strategy rather than as risk-free money.
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Does delta-neutral mean USDe has no risk?
No. The strategy may reduce directional exposure, but it does not eliminate leverage, liquidity, counterparty, or liquidation risk.
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What role did Binance allegedly play in the crash?
Xu said Binance's borrowing setup allowed users to leverage USDe through repeated borrow-and-buy transactions, amplifying exposure and liquidation pressure.
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What risk controls are now under scrutiny?
The criticism focuses on Binance's collateral and borrowing design and on Ethena's USDe risk framework, particularly how leveraged positions could contribute to cascading liquidations.
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