There's a pretty interesting industry controversy that has recently exploded again. It's been nearly four months since the record-breaking flash crash on October 10th, but opinions about what exactly happened still vary, and it has even escalated into public shouting matches.

The CEO of a major exchange fired off a tweet, pointing the wave of $19.16 billion in liquidations that day to a specific target—Ethena's USDe token. His core logic is that traders were lured into swapping stablecoins for USDe to earn yields, then using USDe as collateral to borrow more stablecoins, and then swapping back into USDe, creating a self-reinforcing leverage cycle. On the surface, it looks no different from traditional stablecoins, but the actual risk is much higher. When volatility hits, this structure collapses like a row of dominoes.

He even issued a more straightforward statement: no complexity, no surprises—just irresponsible marketing activities by certain companies. On that day, hundreds of billions of dollars were liquidated, and as the CEO of a certain exchange, he clearly saw that the microstructure of the entire market had changed from that day onward.

But this claim was immediately challenged. Haseeb Qureshi, a partner at Dragonfly, directly called this argument "ridiculous," believing it’s too far-fetched to pin the entire incident on a single bad actor. He pointed out that if a token failure truly triggered a chain reaction, the pressure would have appeared simultaneously across all exchanges. But in reality, USDe only de-pegged on a certain centralized exchange (CEX), with no issues elsewhere. Yet, the liquidation spiral happened on every exchange. How to explain that?

Qureshi’s alternative explanation is more macro: it’s that macro news scared an already leveraged market. Liquidity suddenly vanished, forced liquidations triggered more forced liquidations, creating a reflexive cycle. No natural buyers are willing to step in during the chaos.

A competing CEX also chimed in, attributing the October 10th flash crash to macro-driven sell-offs, over-leverage, and liquidity exhaustion, denying any core trading system failure. He also sharply pointed out on Twitter that Dragonfly was an early investor in a major exchange, implying potential conflicts of interest.

But the CEO pointed to as the culprit quickly rebutted, saying Dragonfly had never invested in their platform, and the details can be verified.

Some market observers believe this isn’t an either-or issue. Some say the market crash was due to the entire industry’s over-leverage in altcoins, and once macro factors exposed vulnerabilities, there was no sustainable organic buying support. This explanation sounds more like it’s saying the real problem isn’t a specific product or exchange, but that the entire market structure itself is too fragile.