Only five of the 10 biggest crypto hacks in history ended with Bitcoin higher by the end of the month, wrote Bitwise chief investment officer Matt Hougan on November 4. He says the $6.3 billi
Only five of the 10 biggest crypto hacks in history ended with Bitcoin higher by the end of the month, wrote Bitwise chief investment officer Matt Hougan on November 4.
He says the $6.3 billion Binance hack is not likely to have a lasting effect on the market.
Hougan tracked Bitcoin (BTC) in the 30 days after the 10 biggest crypto thefts, including Binance. There were five down and five up.
Bitcoin’s 30-day returns after the nine prior largest crypto hacks, with Binance through day 3, from Bitwise’s November 4 memo.
His former colleague and now head of research at Anchorage Digital, David Lawant, was credited with the technique.
The memo came six days after the October 29 Binance heist. It was the biggest cyber-theft in history, in dollar terms, at about four times the previous record.
Bitcoin fell about 4% over the following day, broadly in line with the Nasdaq-100’s decline of about 3% on October 30. It mostly traded flat through November 3.
Thefts leave the asset undamaged, Hougan says. Supply is still capped at 21 million coins, the network still runs, and big institutions still hold it.
In the 17 years that Bitcoin has been around, no one has ever stolen coins by hacking the blockchain. “Bitcoin wasn’t hacked last week. Binance was,” wrote Hougan.
If there were no safer way to hold Bitcoin, hacks would rattle prices, Hougan reasons. He says there is a safer way.
Money from the theft was in Binance’s online “hot wallets.” Exchanges use them for speedy deposits and withdrawals, and they are by design the least protected part of the system.
Attackers appear to have got in through an employee’s laptop.
On November 4, Binance stated that approximately 98% of the affected assets had been restored from its own reserves. It is buying the rest in the market and the OTC market.
Hougan says investors should weigh institutional custodians, personal cold storage, and spot Bitcoin ETFs. ETFs are special to him because a qualified custodian holds their assets offline.
Bitwise does not move any coins out of cold storage without multiple people doing so. Only a restricted number of pre-approved market-maker addresses can receive any transfer.
The Bitcoin behind an ETF moves once a day, so Hougan pitches ETFs to long-term holders.
In a similar vein, TD Cowen’s Lance Vitanza wrote that the hack revealed weaknesses in Binance’s security, not in the technology, reported Cryptopolitan. Vitanza wrote, “We do not stop using dollars when a bank is robbed, just as car theft does not invalidate the automobile.”
Bitcoin closed up about 4% at $80,405 and Ether (ETH) closed up about 7% at $2,422 on Nov. 4. The rally followed the Nov. 3 U.S. midterm elections that gave Democrats control of both chambers of Congress.
Shares of Strategy and Coinbase leapt about 5% and 4%, respectively. The record hack wasn’t as shocking to prices as past crises, said 21Shares crypto research strategist Matt Mena, who’s watching to see if Bitcoin holds between $76,000 and $78,000 and whether ETF inflows restart.
Hougan’s longer-term bull case relies on continued institutional demand.
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