- Last week, overall cryptoassets performed well and even outperformed US equities, despite the biggest cryptocurrency exchange hack in history.
- Our in-house “Cryptoasset Sentiment Index” continues to signal a slightly bearish sentiment.
- Around 1.4 bn USD worth of Ethereum (ETH) were stolen from the UAE-based crypto exchange ByBit – the biggest cryptocurrency hack in history. The muted market reaction also underscores once again that sentiment is already relatively bearish and that sellers appear to be relatively exhausted in cryptocurrency markets.
Chart of the Week
Performance
Last week, overall cryptoassets performed well and even outperformed US equities, despite the biggest cryptocurrency exchange hack in history.
More specifically, around 1.4 bn USD worth of Ethereum (ETH) were stolen from the UAE-based crypto exchange ByBit – the biggest cryptocurrency hack in history (Chart-of-the-Week).
Hackers tricked Bybit's security team into approving a sneaky transaction that let them swap out the wallet's brain with their own secret code. Once they had control, they emptied the wallet and took all the Ethereum.
Here is a good technical overview of how the hack was performed.
All in all, the Bybit hack came down to three main issues:
- Users did not thoroughly verify transaction and contract details.
- A browser-based wallet was used, making it vulnerable to spoofing.
- Ethereum contracts are inherently complex and can be modified (“upgradable”), creating security risks.
It is important to note that Ethereum itself was not “hacked” and worked as intended, but rather that upgradable smart contracts were exploited by the hacker.
The latest information implicate that the North Korean hacker Lazarus Group is behind the hack. North Korea's Lazarus Group is alleged to be run by the government of North Korea. The group, also known as Guardians of Peace or Whois Team, is believed to be part of North Korea's cyber operations, specifically linked to the country's military intelligence agency, the Reconnaissance General Bureau.
The North Korean government is generally known for its systematic attacks on cryptocurrency architectures to raise government funds.
Although Ethereum was down more than -3% at the time of the disclosure of the hack, overall weekly performance was not affected significantly and Ethereum was still up by almost +6% on a week-over-week basis. Ethereum even managed to outperform Bitcoin despite this hack.
One of the key reasons could be related to the fact that other major competitor exchanges quickly stepped in and provided Ethereum liquidity to ByBit.
At the time of writing this report, it also appears to be the case that ByBit has already managed to fully close the funding gap in Ethereum through loans, whale deposits, and ETH purchases.
The overall market reaction was relatively muted compared to the size of the hack, highlighting that the overall market structure has become significantly more resilient.
The muted market reaction also underscores once again that sentiment is already relatively bearish and that sellers appear to be relatively exhausted in cryptocurrency markets.
Apart from these developments, Michael Saylor's Strategy (MSTR) has most-likely bought more bitcoins last week and we have also seen other corporations such as HK Asia Holdings Limited (1723 HK) announce further purchases.
In general, among the top 10 crypto assets, Ethereum, Sui, and TRON were the relative outperformers.
Overall, altcoin outperformance vis-à-vis Bitcoin has declined again last week, with 35% of our tracked altcoins managing to outperform Bitcoin on a weekly basis. Nonetheless, Ethereum has managed to outperform Bitcoin last week.
Sentiment
Our in-house “Cryptoasset Sentiment Index” continues to signal a slightly bearish sentiment.
At the moment, 3 out of 15 indicators are above their short-term trend.
Option-related indicators such as the BTC 1-month 25-delta option skew or the 1-month implied volatility for Bitcoin options have improved, while other indicators remain relatively bearish.
The Crypto Fear & Greed Index currently signals a “Neutral” level of sentiment as of this morning.
Performance dispersion among cryptoassets has remained at very low levels, signalling that altcoins have continued to be highly correlated with the performance of Bitcoin lately.
Altcoin outperformance vis-à-vis Bitcoin has declined again last week, with around 35% of our tracked altcoins managing to outperform Bitcoin on a weekly basis. Nonetheless, Ethereum has managed to outperform Bitcoin last week.
In general, increasing (decreasing) altcoin outperformance tends to be a sign of increasing (decreasing) risk appetite within cryptoasset markets and the latest altcoin underperformance signals a bearish risk appetite at the moment.
Sentiment in traditional financial markets as measured by our in-house measure of Cross Asset Risk Appetite (CARA) declined last week. The index still signals a slightly bullish cross asset risk appetite.
Fund Flows
Weekly fund flows into global crypto ETPs have continued to be weak last week, mainly due to ongoing outflows from Bitcoin ETPs.
Global crypto ETPs saw around -596.5 mn USD in weekly net outflows across all types of cryptoassets, after -464.1 mn USD in net outflows the previous week.
Global Bitcoin ETPs have continued to experience with net outflows totalling -612.0 mn USD last week, of which -559.4 mn USD in net outflows were related to US spot Bitcoin ETFs.
The Bitwise Bitcoin ETF (BITB) in the US experienced net outflows, totalling -105.1 mn USD last week.
In Europe, the Bitwise Physical Bitcoin ETP (BTCE) also experienced minor net inflows equivalent to +1.7 mn USD, while the Bitwise Core Bitcoin ETP (BTC1) managed to attract capital of around +0.8 mn USD.
Outflows from the Grayscale Bitcoin Trust (GBTC) continued last week with around -93.6 mn USD in net outflows last week. The iShares Bitcoin Trust (IBIT) also experienced net outflows of around -22.0 mn USD last week.
Meanwhile, flows into global Ethereum ETPs were relatively resilient despite the fallout from the ByBit hack, with only around -9.6 mn USD in net outflows last week.
US Ethereum spot ETFs even recorded net inflows of around +1.6 mn USD on aggregate. Nonetheless, the Grayscale Ethereum Trust (ETHE) continued to experience net outflows with around -15.8 mn USD last week.
The Bitwise Ethereum ETF (ETHW) in the US saw some net outflows of -8.9 mn USD last week.
In Europe, the Bitwise Physical Ethereum ETP (ZETH) saw minor net inflows of +0.3 mn USD while the Bitwise Ethereum Staking ETP (ET32) also saw net inflows last week (+1.0 mn USD).
Altcoin ETPs ex Ethereum once again continued to attract capital last week, with around +27.8 mn USD in global net inflows on aggregate, defying overall negative market trends in ETP flows. The Bitwise Physical Solana ETP (ESOL) had positive net inflows of around +1.1 mn USD while the Bitwise Solana Staking ETP (BSOL) did not experience any creations or redemptions last week (+/- 0 mn USD).
Furthermore, thematic & basket crypto ETPs experienced minor net outflows of around -2.7 mn USD on aggregate last week. The Bitwise MSCI Digital Assets Select 20 ETP (DA20) had sticky AuM (+/- 0 mn USD).
Global crypto hedge funds increased their market exposure to Bitcoin significantly last week. The 20-days rolling beta of global crypto hedge funds' performance to Bitcoin increased around 0.52 per yesterday's close, up from 0.45 the week before.
On-Chain Data
In general, Bitcoin's on-chain developments have rather deteriorated somewhat last week.
Selling pressure has continued to be high last week, with around -1.15 bn USD in net selling volumes on BTC spot exchanges.
On a positive note, BTC exchange balances have declined again which implies a slight increase in the supply deficit of bitcoins on exchanges.
This happened even though whales have sent bitcoins to exchanges on a net basis. More specifically, BTC whales sent +904 BTC to exchanges, indicating a slight increase in whale selling pressure. Network entities that possess at least 1,000 Bitcoin are referred to as whales.
At the time of writing, only 2.716 million BTC remain on exchanges (13.7% of circulating supply), according to data provided by Glassnode, the lowest level since November 2018.
That being said, a measure of “apparent demand” for bitcoin over the past 30 days has turned negative for the first time since October 2024 which is signalling that demand for bitcoins has been decelerating lately.
Futures, Options & Perpetuals
Last week, BTC futures open interest declined by around -10k BTC while perpetual open interest decreased by around -5k BTC.
Bitcoin short futures liquidations spiked temporarily on Friday to the highest level since early February.
BTC perpetual funding rates turned negative on Thursday last week signalling bearish sentiment among perpetual futures traders.
In general, when the funding rate is positive (negative), long (short) positions periodically pay short (long) positions, which is indicative of bullish (bearish) sentiment.
The BTC 3-months annualised basis stabilised last week to around 7.7% p.a. averaged across various futures exchanges.
Meanwhile, BTC option open interest saw an increase by around +14k BTC last week. The put-call open interest ratio also increased somewhat, signalling increased relative put buying last week.
The 1-month 25-delta skew for BTC also increased slightly signalling an increase in bearish sentiment.
BTC option implied volatilities continued to decline as the market has moved sideways.
At the time of writing, implied volatilities of 1-month ATM Bitcoin options are currently at around 46.3% p.a.
Bottom Line
- Last week, overall cryptoassets performed well and even outperformed US equities, despite the biggest cryptocurrency exchange hack in history.
- Our in-house “Cryptoasset Sentiment Index” continues to signal a slightly bearish sentiment.
- Around 1.4 bn USD worth of Ethereum (ETH) were stolen from the UAE-based crypto exchange ByBit – the biggest cryptocurrency hack in history. The muted market reaction also underscores once again that sentiment is already relatively bearish and that sellers appear to be relatively exhausted in cryptocurrency markets.
Appendix
