Bybit Hack Triggers Market Crash, Liquidating Hundreds of Millions in Crypto Positions

The Crypto market crashed today following a major security breach at cryptocurrency exchange Bybit which triggered a broad market decline

The crypto market took a hit today after a major security breach at cryptocurrency exchange Bybit triggered a broad market decline, resulting in hundreds of millions in liquidated positions across the crypto sector.

The hack, which saw the loss of $1.4 billion in Ethereum-related tokens, sent ripples through the digital asset marketplace.

Data from analytics firm Coinglass revealed that the market downturn led to the liquidation of $544 million worth of open positions within 24 hours. These mass liquidations contributed to the current bearish market conditions, creating uncertainty among traders and investors.

The stolen assets from Bybit included Lido Staked Ether (STETH), Mantle Staked Ether (mETH), and other cryptocurrencies.

In response to the security breach, Bybit CEO Ben Zhou confirmed that withdrawals remain operational. However, users were advised to expect longer processing times due to increased network congestion.

The impact of the hack quickly spread across major cryptocurrencies. Bitcoin experienced a decline of 0.45%, while Ethereum fell by 1.5%. XRP saw a more pronounced drop of 3.50% within the same 24-hour period.

The market turbulence affected various sectors of the crypto ecosystem, including DeFi protocols. Ethena Labs, which operates the yield-bearing stablecoin USDe, took steps to address concerns about its exposure to Bybit.

The protocol initially reported having around $30 million in exposure through financial derivatives on Bybit. However, it later announced that it had reduced this exposure to zero.

Ethena Labs emphasized that its reserve fund, which held around $46 million as of the fourth quarter of 2024, provides additional security for USDe holders.

The protocol also clarified that none of USDe’s cryptocurrency backing is held directly on Bybit, but rather with an off-exchange custodian called Copper.

The market downturn comes amid other challenges facing the cryptocurrency sector. Economic tensions between the United States and several countries, including China and Canada, have added to the bearish sentiment.

Additionally, Bitcoin has faced pressure from Exchange-Traded Fund (ETF) outflows from asset managers.

Former Alameda Research co-founder and current Pharos CEO Tara McAulay has expressed concerns about the market conditions, suggesting the possibility of a decline similar to the market crash of 2020.

The memecoin market has also faced its own controversies. The recent LIBRA scandal, involving Argentina’s president Javier Milei, raised questions about market manipulation within the memecoin sector. The token, which was promoted as a means to fund Argentina’s development, experienced a rapid rise and fall.

The Bybit hack has highlighted ongoing security concerns within the cryptocurrency industry. Despite the exchange’s size and reputation, it became the target of one of the largest cryptocurrency thefts in recent history.

The incident has prompted many investors to reassess their risk management strategies. The rapid spread of the market decline demonstrates the interconnected nature of cryptocurrency markets and their vulnerability to large-scale security breaches.

As investors reacted to the market movements, trading volumes increased across major exchanges. The surge in activity contributed to network congestion and slower transaction processing times across multiple platforms.

DeFi protocols and other crypto platforms moved to reassure users about their security measures and exposure to affected entities. Many emphasized their use of separate custodians and additional safety measures to protect user assets.

Exchange representatives and market analysts continue to monitor the situation closely as the full impact of the Bybit hack unfolds. The incident serves as a reminder of the importance of robust security measures in the cryptocurrency industry.