Binance disputes responsibility for $19bn crypto rout

Speaking as scrutiny intensified over the scale of liquidations across digital asset markets, Teng described the sell-off as “a crypto event, not a Binance event”, arguing that the cascade reflected excessive leverage across multiple platforms and a sharp reversal in sentiment rather than any single venue’s conduct. The comments came after data providers recorded one of the largest single-month liquidation waves since the market upheavals of 2022.

Market trackers show that Bitcoin and Ether suffered abrupt price swings during October, triggering automated margin calls on derivatives exchanges. As prices fell, leveraged traders were forced to close positions, accelerating the downward spiral. Analytics firms estimate that more than $19 billion in long and short positions were liquidated across centralised and decentralised venues combined, underlining the fragility of high-leverage strategies in volatile markets.

Binance, the world’s largest crypto exchange by trading volume, processes billions of dollars in daily derivatives activity. Its futures platform allows leverage of up to 125 times on certain contracts, though the company says most users trade at significantly lower levels. Critics argue that the availability of high leverage can amplify systemic stress, particularly when liquidity thins during rapid price moves.

Teng countered that liquidation mechanisms are automated and transparent, designed to protect both the exchange and users from deeper losses. “When markets move sharply, risk engines do what they are built to do,” he said, noting that liquidations also occurred on rival platforms. Industry data confirm that exchanges including OKX and Bybit also saw substantial forced closures as volatility spiked.

The October slide followed a period of strong gains in major cryptocurrencies earlier in the year, when optimism over exchange-traded fund approvals in the United States and expectations of looser monetary policy had fuelled inflows. Analysts say that crowded positioning left the market vulnerable to sudden reversals. A shift in macroeconomic signals, including firmer US economic data and uncertainty over interest rate trajectories, prompted traders to pare risk.

Academic research on crypto derivatives markets has repeatedly highlighted how leverage magnifies both gains and losses. Studies from leading finance journals have shown that liquidation cascades can intensify volatility beyond what underlying fundamentals would justify, particularly in markets that trade around the clock with fragmented liquidity. Unlike traditional equity markets, crypto venues operate continuously and are not subject to uniform circuit breakers.

Regulators in several jurisdictions have tightened oversight of derivatives trading since the collapse of FTX in 2022 exposed governance failures and risk management weaknesses. Binance itself has faced regulatory challenges, including settlements with US authorities over compliance lapses. The company has since restructured parts of its leadership and strengthened its compliance framework, according to public statements.

Teng, who took on a more prominent leadership role after Changpeng Zhao stepped down as chief executive following a plea agreement in the United States, has sought to position Binance as a more transparent and regulated entity. He has emphasised that the exchange maintains proof-of-reserves disclosures and segregates user assets, measures intended to reassure customers wary of counterparty risk.

Market participants remain divided over whether exchanges should impose stricter leverage caps. Some argue that professional traders require flexible instruments to hedge and manage exposure, while others contend that retail access to high leverage increases the likelihood of destabilising cascades. Data from analytics firms indicate that a significant portion of liquidations in October involved retail-sized positions, though large traders were also caught out by the speed of the move.

The episode has revived debate about market structure in digital assets. Centralised exchanges such as Binance dominate derivatives volumes, yet decentralised platforms have grown rapidly, offering perpetual futures contracts without intermediaries. During the October turbulence, on-chain protocols also experienced spikes in liquidations, suggesting that leverage-driven stress is not confined to any single model.

Price action has since stabilised, with Bitcoin recovering part of its losses and trading within a narrower range. Volatility indicators, however, remain elevated compared with levels seen earlier in the year. Analysts warn that as long as leverage remains a defining feature of crypto markets, sharp corrections are likely to recur.