Bybit exchange wallet was hacked, resulting in a loss of up to $1.5 billion

On February 21, a black swan event suddenly occurred in the cryptocurrency market: the Bybit exchange wallet was hacked

The cryptocurrency market experienced a significant event on February 21 with the hacking of Bybit exchange wallet, leading to a loss of up to $1.5 billion. This incident set a record for the largest security incident in history.

As the stolen crypto assets were mainly Ethereum and its pledge certificates, ETH plunged more than 5% during the session, dragging down the broader market.

While Bybit, the party primarily responsible for the security incident, has announced full compensation for users' losses, the impact of the theft on the industry and the market is not over yet.

Firstly, it remains an open question whether Bybit has enough of its own assets to make up for the asset gap caused by the theft of coins. Taking Binance's assets in January as a reference, its reserves corresponding to $100 billion in customer assets are $8.7 billion. Then Bybit's $15.7 billion in customer assets should correspond to $1.37 billion in reserves. This means that the pressure to fully compensate customer assets is still huge.

At present, whether it is through internal fund scheduling or external financing to fill the funding gap, Bybit needs to audit the asset status of the exchange and publicize the results in order to restore market confidence as soon as possible. Otherwise, Bybit may face the risk of a run again, which will trigger market panic.

Secondly, the main reason for the attack on Bybit wallet was that hackers obtained Safe.Global's AWS S3 or CloudFront account/API key, thereby tampering with the front-end JavaScript file stored in S3 and implanting malicious code targeting Bybit's cold wallet address. Many professionals believe that this security incident may involve insider cooperation.

As one of the important multi-signature wallet service providers in the Web3 field, SAFE currently still manages more than $100 billion in crypto assets, which has caused great concerns in the market about the spillover of security risks. In addition, when using an external wallet system, Bybit did not conduct a secondary review of important transactions, and its security awareness was weak, which led to a crisis of trust among users in decentralized exchanges. Therefore, it may take a long time to solve the series of problems caused by the theft of coins and rebuild market confidence.

In addition to the concentrated outbreak of internal risks, the impact of macro risks is also one of the important reasons for the continued decline of the crypto market. Against the backdrop of Trump's fiscal spending cuts and wielding the tariff stick, the U.S. stock market continued to fluctuate, with the median decline of the seven technology giants in the past week reaching 13%. This makes it difficult for the crypto market to enjoy the liquidity spillover of the U.S. stock market. Therefore, while the U.S. stock market plummeted, the Bitcoin ETF also suffered a record outflow. Without policy (national reserve Bitcoin) benefits or technological breakthroughs (improvement in fundamentals) as a hedge, the crypto market will continue to be under pressure from the decline of the U.S. stock market.

However, despite the lack of innovation in the crypto market, the valuations of most application-related tokens are below 80% of the historical percentiles, and the prices are still below 90% of the historical percentiles, which means that the valuations of most projects have returned to the level of Bitcoin at $15,500. The extremely low valuations have already reflected the sluggish fundamentals in advance.

In addition, despite the huge resistance to establishing a national reserve of Bitcoin, Trump has begun to fulfill his campaign promise to "reverse the SEC's attitude towards crypto regulation" since last week.

Firstly, in the past week, the US SEC withdrew its lawsuit against Coinbase and terminated its investigation into projects such as Robinhood Crypto, OpenSea, Uniswap Labs, and Tron. In response to the US SEC's abandonment of its investigation into Uniswap, Hayden Adams, co-founder of Uniswap, said that the SEC's previous investigation lasted three years, wasted a lot of time and millions of dollars, and had a significant impact on the company. The human, material, and financial pressures that must be borne in these lawsuits are not something that ordinary companies can afford. This means that many small and medium-sized projects are basically closed down once they are targeted by the SEC. With the end of the era of brutal regulation, the living environment of blockchain projects will be greatly improved.

Secondly, President Trump will host the first White House Cryptocurrency Summit and deliver a speech on March 7. The summit will be hosted by David Sachs, the White House crypto director, and managed by Bo Heins, the executive director of the task force. At that time, founders, executives, investors of well-known projects and members of the President's Digital Asset Task Force will gather together. The goal of the summit is to develop a clear regulatory framework, promote innovation