ETH Drops 4% After Bybit’s Hack is Confirmed – Should You Buy the Dip?

The well-known blockchain investigator ZachXBT was among the first to report the incident through his Telegram channel after he identified suspicious outflows coming out of one of Bybit’s known cold wallet addresses.

Bybit’s CEO Confirms Hack

The exchange’s co-founder and CEO, Ben Zhou, confirmed just three hours ago that one of their Ethereum cold wallets was compromised. The criminals siphoned 401,346 ETH tokens valued at approximately $1.1 billion at current prices.

Zhou assured the exchange’s users that no other wallet was compromised in the process. The hackers reportedly accessed the wallet by tampering with a transaction request sent to the signatory wallets that, once approved, modified the smart contract’s logic so that the digital assets contained in this storage were transferred to the criminal’s address.

Once the amount of the hack is confirmed by official sources from the exchange, the incident would rank as the largest heist involving a centralized exchange. The hacker has been spreading the funds across a significant number of wallets to make it more difficult for investigators to trace them.

Zhou confirmed that the exchange has the resources to cover this loss and assured investors that their account balance will not be impacted. Moreover, the CEO confirmed that all withdrawals are working normally.

However, early estimates from BitMEX Research claim that up to 75% of the ETH deposits held by Bybit users may have been lost in this incident.

Ethereum Sheds Early Gains After the News Broke

News of the hack virtually erased most of the gains that ETH had been experiencing throughout the day. Before the news broke, the token had booked a 3.3% gain in the past 24 hours. Meanwhile, its weekly gains stood at 5% before the incident as well.

Bybit’s Ethereum trading volumes account for 5% of the total, according to data from CMC. However, the hack does not compromise the Ethereum network in any way or its prospects.

The 1-hour chart shows that ETH’s sharp drop ended up confirming a bearish double-top pattern.

However, zooming out to the daily chart, this decline barely moves the needle. Ethereum’s price action showed a bear trap forming during the second week of February as the token dropped below its trendline support.

However, ETH moved back up in the past few days to invalidate this breakout. For now, Ethereum remains on a downtrend, but its trajectory is relatively predictable if it continues to fluctuate within the descending price channel shown in the chart.

Momentum indicators are favoring an upcoming retest of the channel’s upper trend line in the next few days. However, the severity of today’s decline may also push ETH near the support line again.

Long-term investors may see this as a buying opportunity, as the market seems to be overreacting to the hack.

Currently, ETH is trading just 11% above its pre-election price. Considering the huge tailwind that a pro-crypto federal government in the U.S. represents to the crypto industry and the upcoming implementation of the Pectra upgrade on Ethereum, this could be an opportunity to grab ETH at a decent price compared to November-December levels.