As $1 billion in redemptions ripples through the market, Esena Institute has argued that its synthetic dollar USDe worked as designed and that Binance’s proprietary pricing system triggered the meltdown.
This weekend’s market turmoil affected all crypto sectors, with stablecoins also being targeted following a supposed glitch at the world’s largest exchange.
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Ethena defends against billion dollar Binance meltdown
In a detailed post on Twitter, Ethena founder Guy Young refuted USDe Depeg’s claims. He said the protocol’s minting, redemption, and collateral functions were functioning normally during the market crash.
“Ethena’s minting and redemption functionality had zero downtime…[The protocol processed]over $1 billion in withdrawals in a matter of hours, and over $2 billion in 24 hours without any issues,” Young said.
Young said the disruption stemmed from a single exchange, the Binance exchange, whose internal oracle index became disconnected from the deepest on-chain liquidity pool.
The exchange’s order book began referencing its own spot prices rather than broader market data, causing USDe prices to briefly tumble. As automatic liquidation spread to Binance’s unified collateral system, market makers were sidelined as they were unable to arbitrage due to exchange differences and deposit freezes.
Analyst Pavel Artukhov, who called this a perfect storm, argued that Binance’s unified account setup allows all assets to be used as collateral. As the prices of other assets such as USDe and wBETH fell, traders faced forced sales to maintain margin, amplifying selling pressure across the platform.
“Traders needed to cover negative profits and losses and meet new margin requirements, but USDe could only do half the job because of Depeg,” Altukhov wrote.
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Other analysts, however, questioned whether the incident was an organized operation or a technical misfire. Analyst ElonTrades claimed that someone intentionally abused Binance’s internal price feed knowing that the system was being used to calculate collateral value.
For the layman, when the price of USDe briefly dropped on Binance, many DeFi money markets (Curve, Fluid, etc.) were using “hard-coded” pegs. This means that we treated USDe on a par with USDT or USDC (1:1) for collateral and lending purposes.
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So, even though Binance’s internal price feed showed USDe falling below $1, the DeFi protocol ignored that temporary decline because it was referring to a fixed peg or deep on-chain liquidity pool, rather than Binance’s internal order book data.
Tether CEO Paolo Ardoino used the rhetoric to advocate for USDT as the best collateral for derivatives and margin transactions.
“USDT is the perfect collateral for derivatives and margin trading. It’s liquid and fire-tested. If you use illiquid tokens like a banana, a horse, three olives, or a piece of bubble gum as collateral, be prepared when the market moves,” he wrote.
Ethena pivots to transparency and Oracle reform after turmoil
In response, Ethena has released detailed guidance on Oracle design and risk management. USDe stablecoin issuers emphasize the need to distinguish between “temporary loss” and “permanent impairment” of collateral.
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The team also provides real-time Proof of Reserve (PoR) access to exchanges and oracle providers. This includes Chaos Labs and Chainlink, which enable on-demand verification of USDe backing.
Industry voices have largely welcomed the push for transparency. Researcher Wang Xiaolou said Ethena’s approach “makes sense.” Analysts argue that pegging USDe to USDT can avoid unnecessary liquidations in the volatile DeFi market. At the same time, PoR-based triggers can react in case of real failures.
Still, while the DeFi money market escaped unscathed this time, some analysts, including Duo Nine, remain cautious.
“After the crash ended, USDe lost its peg to Binance. This was related to Binance, which DeFi escaped thanks to the hard-coded peg to USDT. Next time, a panic could start in DeFi and redemption speed will not help. USDe remains a high-risk asset,” the analyst wrote.
The claim clearly states that Ethena’s system was not broken, the venue (Binance) was. But the incident revealed a deeper structural problem. Centralized exchange data feeds could cause systemic stress across the increasingly interlinked CeFi-DeFi playing field.
