Since the world's largest cryptocurrency exchange suffered a record-breaking cyber theft last week, investors had braced for the worst, yet Bitcoin has surprisingly held firm.
Bitcoin rose on Monday and is currently trading around $78,000, roughly 4% below its high last Thursday 鈥?before Binance disclosed a severe hacking incident. The hack ultimately resulted in $6.3 billion of user funds being stolen.
Bitcoin's resilience is widely attributed to Binance's swift response: from the outset, Binance pledged to absorb all losses.
"Bitcoin held up over the weekend, essentially amounting to a vote of confidence in Binance's statement. The market clearly believes Binance has enough funds to cover the losses," said Caroline Mauron, co-founder of Orbit Markets.
Having already been under pressure last week from a sell-off in risk assets, Bitcoin's relatively firm performance highlights that investors are treating this incident very differently from the last time a major cryptocurrency exchange suffered a massive disaster.
In 2022, as FTX, then the world's second-largest cryptocurrency exchange run by former billionaire Sam Bankman-Fried, spiraled from a liquidity crisis into bankruptcy, Bitcoin fell 19% over three days.
Sean McNulty, a derivatives trader at market maker AQC Tech, said one reason Bitcoin has held up better this time is that Binance is buying Bitcoin to compensate users for their losses. But he said underlying sentiment remains tense and uneasy.
"People think this is just the tip of the iceberg. Given the capabilities of AI, more hacks are expected," McNulty said, referring to this year's incidents of cyberattacks carried out using AI. "If Binance, the world's largest exchange, can be hacked, then no one is safe."
One sign reflecting deeper nervousness is that investor demand for protection against short-term Bitcoin declines is increasing. According to options on cryptocurrency derivatives platform Deribit, the 1-day 25 Delta put skew rose about 1 percentage point within 24 hours to 6.37 percentage points. The skew measures how many more investors are buying "downside insurance" than those betting in the opposite direction.
Comments