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Stakers are migrating away from centralized exchanges like Bybit, Everstakes’ COO said.
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Cryptocurrency exchange Bybit’s billion-dollar cybersecurity exploit was a setback for institutional adoption of crypto staking, Bohdan Opryshko, staking services provider Everstake’s chief operating officer, told Cointelegraph.
On Feb. 21, the Lazarus Group, a hacking operation based in North Korea, gained access to Bybit’s wallet credentials and stole some $1.4 billion worth of liquid staked Ether (STETH). It was the industry’s largest-ever hack.
High-profile cybersecurity breaches dissuade institutional investors from allocating to crypto, including staking Ether (ETH), Opryshko said.
“When an auditor or a potential institutional investor evaluates, for instance, an ETH [exchange-traded fund] and sees a billion-dollar hack, their legal and compliance teams are likely to freeze any plans to allocate funds into such assets,” Opryshko told Cointelegraph.
The Bybit hack may also accelerate an ongoing exodus by stakers from centralized crypto exchanges (CEXs).
In the past six months, staked ETH on CEXs declined by nearly 7%, from 8.6 million ETH in September to 8 million ETH in February, according to Opryshko. This figure dropped by 0.5% immediately after the Bybit hack, he added.
“Users increasingly withdraw their staked assets from CEXs, possibly moving them to non-custodial staking solutions or hardware wallets for better security,” Opryshko said.
Onchain records of Bybit exploit. Source: Etherscan
Related: Ethena assures users of solvency after Bybit hack
Institutional staking adoption
Ether exchange-traded funds (ETFs) in the US do not permit staking. However, in February, the US Securities and Exchange Commission acknowledged requests from issuers such as 21Shares to start taking a portion of Ether ETFs’ holdings.
Staking is already permitted for Ether ETFs in Europe. Analysts expect regulators will soon permit staking by US ETFs.
As of Feb. 27, Ether ETFs drew nearly $3 billion in net inflows since launching in July, according to data from Farside Investors.
They still greatly lag Bitcoin (BTC) ETFs, which spearheaded institutional crypto adoption with more than $37 billion in net inflows since January 2024, Farside’s data showed.
Staking involves locking up Ether as collateral with a validator on the Ethereum blockchain network. Stakers earn ETH payouts from network fees and other rewards but risk “slashing” — or losing ETH collateral — if the validator misbehaves.
Other popular cryptocurrencies, including Solana (SOL), also feature staking mechanisms.
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This article first appeared at Cointelegraph.com News
