Source: Glassnode; Compiled by Baishuei, Jinse Finance
Summary
Bybit suffered one of the largest hacker attacks in cryptocurrency history, losing 403,996 ETH (about $1.13 billion) from its cold wallet due to a smart contract vulnerability. This vulnerability caused a panic withdrawal, with a total outflow of about $4.3 billion from cryptocurrency exchanges.
Market sentiment deteriorated rapidly, triggering widespread sell-offs. Bitcoin's monthly performance fell to -13.6%, while Ethereum (-22.9%), Solana (-40%) and Meme Coins (-36.9%) erased gains of several months, resetting the market momentum to the level of April 2024.
The price decline has pushed Bitcoin back into the "space" of actual supply between $70,000 and $88,000, a low-cost base density region. This weakness was initially driven by long-term holders selling, and the Bybit hack exacerbated this weakness, adding to the downward momentum.
As prices fell below the cost base of short-term holders, new demand investors faced immense pressure and began to suffer significant losses. Historically, this marks the period of seller fatigue, however, persistent lack of demand may prolong the current downtrend.
Historic Hack Shakes the Market
On February 21, 2025, one of the largest exchange hacks in cryptocurrency history shook the market, as Bybit suffered a severe security breach. The attackers stole 403,996 ETH (about $1.13 billion) from the platform's Ethereum cold wallet, using smart contract privileges to reroute the funds to an anonymous address.
Bybit CEO Ben Zhou explained that the attack was carried out through a "Musked UI", where a fraudulent interface tricked signers into approving malicious transactions. Although the intrusion was severe, Bybit assured users that other cold wallets remain secure, and withdrawals can still be processed normally.
The hacker's transactions show that the stolen assets were not limited to Ethereum, but included multiple assets:
Ethereum (ETH): 403,996 ETH were stolen by the hacker
Staked Ethereum (stETH): 91,076 stETH were stolen by the hacker
mETH: 8,000 mETH were stolen by the hacker
cmETH: 15,000 cmETH were stolen by the hacker
This hack resulted in the theft of nearly $1.48 billion, causing market unease and raising concerns about exchange security, fund safety, and potential broader sell-off pressure.
Market Impact and Exchange Outflows
Following the hack, market volatility intensified, with panic withdrawals as users rushed to protect their assets, leading to a significant decline in Bybit's reserves.
By February 24, 2025, Bybit experienced substantial outflows of BTC, USDT, and USDE:
Bitcoin (BTC): 21,248 BTC net outflow (70,604 BTC → 49,356 BTC)
Tether (USDT): $1.76 billion USDT net outflow ($3.25 billion → $1.5 billion USDT)
USDE: $217.47 million USDE net outflow ($578.37 million → $360.9 million USDE)
These figures demonstrate Bybit's liquidity loss, exacerbating concerns about the security of centralized exchanges.
Peak Outflows
By February 24, 2025, Bybit's primary asset reserves (including Bitcoin and stablecoins) declined from $10.8 billion at the time of the hack to $6.5 billion, with a cumulative outflow of $4.3 billion. While the initial panic withdrawal wave was severe, the outflow rate has since moderated, indicating a gradual stabilization.
Concurrently, with Bybit's efforts to replenish its holdings, the Ethereum reserve (including native ETH and staked ETH) rebounded to $1.19 billion. However, the ETH price remains weak, dropping to $2,490, and the subsequent outflow of around $117 million suggests that investor confidence remains fragile.
Ethereum Reserve Replenishment
As of February 26, 2025, Bybit has received $1.58 billion in Ethereum inflows, with $802 million (50.7%) coming from just 8 large transactions.
These inflows suggest a deliberate effort to replenish the reserves, potentially through internal platform transfers, strategic acquisitions, or external deposits from institutional liquidity providers.
Alongside Bybit's efforts to rebuild its Ethereum reserves, the exchange has also experienced significant Bitcoin outflows. Since the hack, the total Bitcoin outflow has reached $2.47 billion, with 47.2% ($1.16 billion) coming from five large transactions.
Tether (USDT) has also seen a similar outflow trend. During the same period, the outflow reached $2.25 billion, with 38.1% ($854 million) coming from eight large transactions.
By analyzing Bybit's Ethereum replenishment efforts and the substantial outflows of Bitcoin and Tether, we gain a deeper understanding of how the exchange (and the broader entity) is navigating one of the largest hacker attacks in cryptocurrency history.
Post-Hack Market Turmoil
As the impact of the Bybit hack becomes increasingly apparent, the market's response has been heightened volatility and a sharp decline. With overall market liquidity decreasing and spot demand cooling, the selling pressure has intensified, triggering a broader correction.
The pervasive market weakness has led to a dramatic 13.6% monthly decline in Bitcoin's price momentum, while Ethereum and Solana saw even larger drops of -22.9% and -40%, respectively. The Meme Coin Index also plummeted by -36.9%, highlighting the strong risk-off sentiment.
This downturn has reversed the positive price uptrend of the past several months, resetting the momentum to the level of April 2024. The magnitude of the decline underscores the widespread fragility of market confidence following the record highs of December 2024.
Bitcoin Reenters Low Liquidity Zone
The Cost Basis Distribution (CBD) heatmap illustrates how Bitcoin's December 2024 ATH created a supply gap in the $70,000 to $88,000 range. During the strong uptrend, prices often outpaced capital inflows, leading to a reduction in the actual supply concentration within this range.
As the market rebounded to new highs, long-term holders began to distribute supply, weakening the price momentum. The Bybit hack further exacerbated this downward trend, pushing Bitcoin back into the low-liquidity gap shown in the chart below. As prices now retest this region, the market is seeking demand, as further declines could trigger increased volatility and additional sell-off pressure.
Short-term holders face pressure
With Bit plummeting to $87,000, currently 20% lower than its $109,000 high, recent investors are experiencing severe psychological pressure, as the price is about 5% lower than their cost basis (STH-MVRV = 0.95).
Adjusting the STH-MVRV, we observe that the profitability of new investors has declined by -15.8% from its quarterly median, below the one-standard-deviation threshold (-11%). This indicates significant unrealized losses, which historically have led to sell-offs or forced selling during market downtrends.
Short-term holders start to realize losses
To further analyze the reaction of new investors, we use the STH-SOPR (Spent Output Profit Ratio) to measure whether short-term holders are selling at a profit or a loss.
STH-SOPR has dropped to -0.04, below its quarterly median and significantly below the one-standard-deviation threshold (-0.01).
This indicates a significant increase in realized losses, as many recent buyers are exiting their positions at a loss.
Historically, as the weak hands exit, the deep contraction of SOPR has at least temporarily stabilized the market. However, under the current macroeconomic conditions, the risk of further price declines may persist if there is no strong demand catalyst.
Summary
After the Bybit hack, the market experienced a broad-based correction, leading to a -13.6% monthly performance for Bit, while ETH, Solana, and MEME Coins saw even larger declines, resetting the market sentiment to the level of April 2024.
As Bit retraces to the "zone" of its realized supply, short-term holders are facing increasing unrealized losses. Consequently, STH-MVRV and STH-SOPR have fallen below statistical lows, indicating significant losses for new investors due to declining profitability.
If demand fails to recover, further downside risks may persist, so the next few weeks will be crucial in determining whether Bit stabilizes or the sell-off intensifies.
