A post triggers the "biggest tragedy in crypto history": Binance outage, "third largest stablecoin" depegs, and the brutal "iron chain incident".
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This Friday, a post by U.S. President Trump on social media threatening tariffs acted like a bombshell, triggering a round of brutal “bloodbath” in the cryptocurrency market.
Bitcoin’s price sharply retreated from a record high of over $126,000 on Friday, once dipping below the $110,000 level, with a daily drop of 13.5%. Ethereum at one point plummeted over 17%, while Ripple and Dogecoin both plunged over 30%.
The total market value of cryptocurrencies evaporated by nearly $800 billion in a matter of hours. Statistics show the total liquidations of leveraged positions across the network exceeded $20 billion, described by the industry as “the largest liquidation event in crypto history.”
However, when the market needed liquidity most, some centralized exchanges (CEX) failed. At the peak of liquidations, systems at exchanges such as Binance experienced delays and trading interruptions, with a large number of users reporting they were unable to execute orders or manage positions, which led to greater losses.
Social media was filled with anger toward Binance, accusing it of “pulling the plug” at crucial moments. This incident not only exposed the technical bottlenecks of centralized exchanges during extreme market moves, but also reignited debate about the risk resilience between centralized and decentralized finance (DeFi).
Meanwhile, some believe the plunge was not simply a market-driven event, but a “targeted attack” that exploited Binance system vulnerabilities, triggered by the depegging of certain assets.
An “Iron Chain” Style Liquidation
According to an analysis in a widely-circulated post on Binance Square, this crash was not without warning, but had been brewing in a highly-leveraged market environment.
The post points out that the market was already a “ticking time bomb”, characterized by traders excessively using high leverage, outstanding contract positions at dangerous highs, and an influx of low-quality tokens diluting liquidity.
Trump's tariff threat became the "external spark" for it all. The traditional market reacted first, followed by Bitcoin and Ethereum, while already fragile altcoins collapsed instantly.
Next came the “trigger” of the chain reaction. The crypto market operates on leverage. When prices break through key support levels, the exchanges’ automatic liquidation mechanisms activate. This is not emotional selling but an automatic process executed by exchanges to protect their loans.
The post described the details of the cascading liquidation:
- First, accounts using cross-margin were forcibly liquidated in aggregate as some asset prices dropped, with their collateral forcibly sold by the system;
- Then, the forced sale of collateral further depressed prices, causing a “one liquidation triggers another” waterfall effect.
Data shows that within just a few minutes, over $550 million in futures positions were wiped out, ultimately resulting in a total liquidation disaster exceeding $20 billion.
Outage Turmoil: Centralized Exchanges Face Trust Crisis
When the market most needed liquidity and stability, some centralized crypto exchanges (CEX) did not perform well.
According to Cryptopolitan, several centralized exchanges suffered severe system congestion during the liquidations, causing app freezes, order book lags, and some users were even locked out of their accounts during volatile markets, unable to take any action.
Besides Binance, platforms like Coinbase and Robinhood reported similar issues.
In sharp contrast, decentralized finance (DeFi) platforms smoothly passed this stress test. According to reports, decentralized exchanges (DEX) such as Uniswap and Aave had no technical problems or service interruptions during market turmoil.
Among them, Aave handled $180 million in liquidations perfectly with no manual intervention, while Uniswap handled nearly $9 billion in trading volume. This performance gap has again put the trustworthiness of centralized platforms under scrutiny.
“Targeted Attack” or System Defect? The World’s Third-Largest Stablecoin Severely Depegs
As more details emerge, a theory that this crash was a “targeted attack” on Binance is drawing attention.
Forgiven, an executive at Conflux Network, posted on social media stating, this incident may have been a coordinated attack on Binance’s Unified Margin system. This system allows traders to use multiple assets as margin in combination.
However, this flexibility turned into a risk conduit when markets became volatile. As assets used as margin—USDe, BNSOL, and WBETH—depegged, the value of the collateral collapsed, triggering massive forced liquidations.
Forgiven noted that attackers may have exploited this by concentrating sell pressure on USDe, BNSOL, and WBETH on Binance, causing severe depegging. Data shows the world’s third-largest stablecoin—USDe—once dropped to $0.65 on Binance, while remaining at $0.90 on other platforms at the same time.
Forgiven believes that the extreme price drops for multiple alternative tokens occurred only on Binance, indicating major market makers’ hedge portfolios were wiped out.
Binance Becomes Everyone’s Target
Regardless of the reasons, as the world’s largest exchange, Binance has become the focal point of user criticism in this storm.
Many users claimed to have encountered account freezes, stop-loss failures, and other issues during the market plunge. More seriously, tokens like Enjin (ENJ) and Cosmos (ATOM) experienced “flash crashes” on Binance, with prices instantly going to zero and then rebounding sharply. This has fueled accusations of market manipulation, with users suspecting the platform profited amid the chaos.
In response, Binance admitted that “intense market activity” caused system delays and display issues, assuring users that “funds are SAFU.” Currently, Binance says its system has been restored.
However, this has not quelled community anger. Critics are calling for regulatory intervention, and this is not the first time Binance has faced such accusations.
Image: Social media is full of user complaints against Binance
In the end, although this leverage-fueled crash was brutal, it also cleared the excessive risks accumulated in the market. As has happened many times in history, deleveraging is part of the market cycle and will continue in the future.
But this time, risk control issues of centralized and decentralized exchanges will remain in the spotlight.
Risk Reminder and DisclaimerMarkets have risks. Investment requires caution. This article does not constitute personal investment advice, nor does it take into account individual users’ particular investment objectives, financial situations, or needs. Users should determine whether any opinions, viewpoints, or conclusions herein fit their specific circumstances. Investing based on this article is at your own risk. ```