The crypto industry aimed to close the past week on a high note, buoyed by Coinbase’s announcement that the US Securities and Exchange Commission (SEC) were likely to dismiss its legal case against the exchange.
This news sent COIN shares soaring nearly 6% in premarket trading, while the broader crypto market experienced a surge, pushing Bitcoin (BTC) closer to the $100,000 mark for the first time in over two weeks.
Bitcoin And Ethereum Plummet After Bybit’s Major Security Breach
This optimistic atmosphere was short-lived. Just hours later, news broke from Bybit, a Dubai-based crypto exchange, revealing it had been hacked in what analysts are calling one of the largest thefts in crypto history, with nearly $1.5 billion worth of tokens stolen.
As the news of the hack spread, market observers noted significant and suspicious withdrawals of Ethereum (ETH) from Bybit. CEO Ben Zhou confirmed the breach, explaining that hackers gained control of a specific Ether cold wallet and transferred its contents to an unidentified address.
In an effort to reassure users, Zhou conducted a livestream, urging them that “your money is safe” and announcing that withdrawals would remain open. He also mentioned that the exchange was securing bridge lending to manage what he termed a “massive bank run.”
The aftermath of the hack was immediate. Bitcoin, which had been riding high on the earlier Coinbase news, dropped nearly 5% from its peak, settling below $95,000 as stock markets closed in New York.
Ethereum, the primary target of the Bybit attack, lost more than 8% of its value. Smaller cryptocurrencies, including popular memecoins like Dogecoin (DOGE), fared even worse, with Dogecoin tumbling 10% from its daily high.
Bybit Incident Fuels Debate On Crypto Regulation
Critics of the current shift in the regulatory environment in the US, including Hilary Allen, a professor at American University’s Washington College of Law, voiced concerns about the consequences of deregulation.
“Deregulated markets sound good until you have this type of attack,” she stated, referring to Bybit’s security breach, cautioning that the push for fewer regulations could lead to significant vulnerabilities for investors.
The day’s events also cast a shadow over the earlier triumph for Coinbase. Despite the SEC’s dismissal of its lawsuit regarding operating as an “unregistered exchange,” the hack at Bybit overshadowed this victory.
Shares of Coinbase’s COIN stock ultimately closed down more than 8%, erasing all gains from the morning surge and marking the steepest drop of the year.
Coinbase’s chief legal officer, Paul Grewal, reflected on the situation, criticizing former SEC Chair Gary Gensler for his approach to regulation and emphasizing the need for comprehensive legislation that protects consumers.
As Benjamin Schiffrin, director of securities policy at Better Markets, stated, “Today’s events just demonstrate crypto and memes are not just highly volatile… but susceptible to these types of hacking incidents where investors’ money can simply be stolen.”
Featured image from DALL-E, chart from TradingView.com