Bitcoin fell as much as 3.7% – below US$79,000 and its lowest level since September – as the United States trading day was wrapping up, with other tokens also selling off. US stocks also ended the session lower, with the Nasdaq 100 tech index dropping nearly 1.4%.
“Hot wallets getting drained is not something new to crypto, but the amount would be a meaningful hack on the largest crypto exchange,” said James Seyffart at Bloomberg Intelligence. “It’s definitely a bad look. And this is one after another,” he said of a recent spate of security incidents.
Already fragile sentiment was hit further amid reports of a potential security breach involving the platform Binance, which, if verified, would add to a bruising run of crypto security incidents. Within recent months, hundreds of millions of dollars were drained from Bitget, while tampering tied to Ledger devices also led to millions of dollars in losses.
Traders had already been bracing for greater volatility in the crypto market this week, with US$11b in options set to expire on Friday (US time). This comes days ahead of next week’s US midterm elections, when Democrats could potentially retake one or both chambers of Congress and open the door to greater regulatory scrutiny for the industry.
Exchange thefts and malfeasance have been an ever-present backdrop of crypto’s almost two-decade ascent and have occasionally provoked protracted bear markets in the currency, the most famous of which was the collapse of Sam Bankman-Fried’s FTX in November 2022.
In what remains perhaps the most notorious hacking incident, Japan-based Bitcoin exchange Mt. Gox was struck in 2011. Over time, the hackers made off with tokens worth billions of dollars based on the current market price. Mt. Gox eventually went bankrupt.
“It’s a huge damage to crypto because of the consistent successful hacks in the space,” said Tian Zeng, chief executive officer of crypto hedge fund Third Eye. “The fact that exploits keep happening makes it dangerous in the age of newest AI models being released every two weeks.”
– With assistance from Suvashree Ghosh.
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