Outside Source
Ether price is down nearly 6% even though Bybit has been buying in bulk. Cointelegraph explains why.
Market Analysis
Ether (ETH) price dropped 5% on Feb. 24, despite reports that crypto exchange Bybit acquired $740 million worth of ETH from the open market. Some traders expected a price rebound after the Feb. 21 hack, anticipating that Bybit’s purchases to cover losses would push prices higher. However, this scenario did not materialize.
Source: lookonchain
Bybit CEO Ben Zhou stated that the transaction was deliberately masked to appear legitimate but contained malicious source code that modified the wallet’s smart contract logic to siphon funds. Historically, Lazarus—the North Korean state-affiliated group reportedly behind the attack—does not rush to liquidate stolen assets, as those wallets are closely tracked and blacklisted by most centralized platforms.
Regardless of the hacker’s intent for the stolen ETH, analysts noted that significant buying pressure was inevitable, as no over-the-counter (OTC) desk or exchange had the liquidity to absorb such an amount. In theory, the combined 2% order book depth for ETH across the top 10 exchanges totals around $52 million, making a $700 million market buy a challenging task.
Source: pythianism
Vance Spencer, co-founder of crypto venture capital firm Framework Ventures, noted that the bridge loans provided to Bybit are temporary, meaning over 400,000 ETH would eventually need to be bought on the open market. This sentiment was echoed by Lewi, a contributor at Perennial Labs, who anticipated a short squeeze that could drive Ether’s price higher.
Data suggests ETH traders closed their leveraged positions
Ether’s price gained 6.7% between Feb. 21 and Feb. 23, briefly retesting the $2,850 resistance level. However, the entire $190 gain was erased on Feb. 24 as ETH dropped to $2,650. Notably, the decline coincided with reports that Bybit had already recovered over 50% of the stolen Ether and accelerated after the exchange confirmed that the position had been fully closed.
A possible reason for Ether’s underperformance was traders who had expected Bybit to aggressively buy ETH on the open market being forced to unwind their positions once it became clear this assumption was incorrect. Most transactions occurred through OTC desks, which seemingly provided sufficient liquidity to absorb the demand.
Ether futures open interest dropped to 8.52 million ETH on Feb. 24 from 8.82 million ETH the previous day. This data suggests that traders closed leveraged positions, despite forced liquidations being relatively small at $34 million. This aligns with expectations, as a 6.7% price move would require 15x leverage to fully wipe out a margin deposit.
Related: In pictures: Bybit’s record-breaking $1.4B hack
Bybit hack highlights risks of Ethereum multisig setups
The Bybit hack itself triggered a significant shift in investor sentiment toward the Ethereum ecosystem, highlighting risks associated with complex multisig setups using the Ethereum Virtual Machine (EVM). The incident underscored the unnecessary complexity and lack of robust defense mechanisms compared to simple hardware wallets, revealing that even institutions managing tens of billions of dollars remain vulnerable to such failures.
Another concern for Ether holders is the low 2.4% adjusted native staking yield, especially as ETH supply growth has reached 0.6% inflation. For comparison, Solana’s SOL (SOL) adjusted native staking yield stands at 4%. Previously, analysts were optimistic about the potential inclusion of staking in US spot Ether exchange-traded funds (ETFs), currently under review by the US Securities and Exchange Commission.
Ultimately, Ether’s price decline stems not only from the Bybit hack but also from excessive optimism among leveraged traders and expectations surrounding the potential integration of staking in US spot ETFs.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
This article first appeared at Cointelegraph.com News
