The biggest hack in crypto history barely moved markets. Why?

In what some crypto security experts are calling “the biggest crypto hack in history,” a major exchange was breached for more than $6 billion of BTC, ETH, stablecoins and other tokens. The company has promised to refund its customers, with around 95% of funds having been returned as of Monday evening, and the FBI has identified North Korean hackers as being responsible for the breach.

Despite the bad news, as of Wednesday, Bitcoin’s price was essentially unchanged from Thursday afternoon (when the hack was disclosed), after a slight decline over the weekend. 

Here’s what experts had to say about why…  

“In my view, the relatively muted crypto market reaction is very constructive, particularly compared to the market's response to prior sizable crypto thefts.” – Tom Lee, Chairman of Bitmine Immersion Technologies 

Lee called the hack a “terrible development,” but noted that ETH fell by less than 4% immediately after the incident, and was actually up around 3% by Wednesday. In comparison, after another exchange hack last February, ETH fell around 8% that day, and 20% within the week after. The selloff was less significant, according to Lee, due to a combination of factors: industry intervention that helped prevent losses; the fact that the hack wasn’t due to a blockchain flaw; and the FBI almost immediately naming North Korea as responsible. The lack of downside, Lee says, indicates that a “crypto bull market is underway.”

“Stablecoins are the most recoverable asset class in crypto because the issuer controls the token contract” – Ari Redbord, global head of policy at blockchain intelligence firm TRM Labs

Redbord, a former U.S. prosecutor, highlighted the swift response from leading stablecoin issuers that helped freeze around $3 billion worth of stablecoins within a day – around half of the total crypto that was stolen. Some stablecoin issuers, like USDC issuer Circle, have the ability to block specific wallets from transferring or receiving tokens, in part due to regulatory and compliance obligations. 

“We would be buyers on weakness… This is not 2022.” – Ramsey El-Assal, analyst at Cantor Fitzgerald 

El-Assal said he expected crypto majors and crypto-related stocks to recover fully, and sees this as a buying opportunity. Analysts from several other firms concurred, with Lance Vitanza of TD Cowen also calling it a dip-buying opportunity, given that the exploit was unrelated to the underlying technology behind bitcoin or other tokens. Meanwhile, Ed Engel and Michael Donovan of Compass Point cited the fact that the exchange had “more than enough liquidity to cover the hole.”

“In scale, the $643 million outflow is still under 1% of spot BTC ETF assets so this was simply a de-risking day, and not capitulation or a loss in institutional confidence” — Rick Maeda, head of markets at Laevitas

The day after the incident saw the largest day of spot BTC ETF outflows in more than four months. Still, the collective net assets held by the ETFs is still more than $98 billion. Maeda said that there could be “modest outflows” in the near-term rather than a quick snap-back.