Binance Explains What Happened During ‘Black Friday’ Market Crash and Reimburses Users $283M

Binance, the world’s largest crypto exchange, has announced that it has reimbursed users with approximately $283 million after the October 10 crypto market meltdown. 

Binance explained that the ‘Black Friday‘ flash crash, which caused the depegging of several assets, was caused by a brief technical glitch after global economic events triggered heavy sell-offs across the crypto market.

Binance Reimburses Users $283 Million for the Black Friday Crash

As a result of the crypto market crash of October 10, now referred to as ‘Black Friday,’ over $19 billion in leveraged positions were wiped out within 24 hours, impacting more than 1.6 million traders globally. While the price drop was a market-wide event, the prices of several assets were noticeably lower on Binance, which disrupted trading. 

The Binance Earn assets, USDE, BNSOL, and wBETH suffered the most from the flash crash that happened over the weekend. For example, Ethena’s USDe stablecoin, intended to be pegged to 1:1 with the US dollar, briefly fell below $0.66 on Binance.

The prices of these assets dropped to near-zero levels, which led to Binance freezing the accounts of many traders. As a result, many traders could not close or hedge their market positions. The flash crash on Binance raised concerns among traders, who argued that as the dominant exchange in crypto trading volume, it should have been more resilient to market turbulence. 

In a response to the events, Binance announced that it had distributed $283 million in compensation to its users who were affected by the flash crash. Binance users who lost funds through collateral liquidations across its earn products, including USDE, BNSOL, and wBETH, were fully reimbursed.

Binance adds that other users affected by brief lags in the internal transfers of funds and Earn product redemptions during the market crash will also be compensated. However, it adds that only those with verified losses will receive compensation.

Binance Explains the Reason for the Market Crash

After apologizing for the market crash, Binance explained that the depegging happened because of a display error on the exchange rather than actual token failures. The forced liquidation volume executed through the Binance platform contributed a comparatively small percentage to the overall trading volume, meaning that this volatility was primarily caused by the general market conditions.

Binance also explained that the disruption of the peg was not the cause of the crash but happened before it. The statement indicated that in the market sell-off, most cryptos fell to their lowest point at 21:21 (UTC), while the de-pegging of the three assets happened after 21:36 (UTC) the same day.

Binance Reacts To Abrupt Price Declines

In addition to the flash crash recorded on yield assets, sudden price drops in some spot trading pairs were also recorded. Binance said that it conducted investigations that found the declines occurred as old limit orders, some dating back to 2019, were filled at the sell-off point when there were a very limited number of buy orders.

This resulted in short periods of time when some token prices plummeted before leveling off. The announcement also justified that the zero price observed in the pairs such as IOTX/USDT was a display problem due to the recent adjustment of the number of decimal places in which the price could move.

Binance concludes by assuring users that it is currently working on the user interface and bettering its systems to avoid such issues in the future. The company assured that its API was not involved in the incident and highlighted the transparency and continuous system enhancement.