Other relatively large crypto assets, such as Ethereum, XRP and Solana, have seen even steeper declines since last Friday, along the lines of 15% to 20%.
Major platform hack
Crypto is inherently volatile, and movements are often hard to interpret.
However, the widely acknowledged catalyst for these recent declines is the hacking of Bybit, a Dubai-based crypto platform that is not permitted to operate in the United States.
On February 21, 2025, North Korean hackers carried out a massive cyberattack on Bybit, which is one of the world's largest cryptocurrency exchanges.
Approximately $1.5 billion worth of Ethereum tokens were stolen. Ethereum is the cryptocurrency with the second highest market capitalization after Bitcoin.
The Bybit hack is considered the largest cryptocurrency hack to have ever occurred. The FBI has attributed this attack to a North Korean hacking group called the Lazarus Group.
During a routine transfer from a cold wallet (long-term storage) to a warm wallet (used for daily trading), the hackers were able to penetrate Bybit’s systems.
Remarkably, Bybit has told customers it will backstop the losses (and has the wherewithal to do so) even if the stolen Ethereum tokens are not recovered.
It is important to emphasize that the hack was on the systems of a foreign exchange, rather than the Ethereum network itself. A comparable scenario might be cash stolen from an online bank account.
Nonetheless, the high profile hack diminishes confidence in crypto markets, which have also been plagued in recent weeks by a number of “rug pull” meme coin scandals. Investors have seen sharp losses after meme coin creators immediately dumped their coins on the market.
Additionally, the downward pressure on crypto markets can also be attributed to the liquidation of stolen tokens (some of which were quickly sold to acquire Bitcoin)—or concerns that they will be.
As with any asset class, selling itself can lead to more selling as investors exit to avoid further losses.
Bitcoin ETFs, the first of which came to market in January 2024, have seen more than $2 billion of outflows this week. Many investors in these products are new to crypto and were likely rattled by the sudden downside volatility.
How should investors respond?
We continue to have a positive long-term view on Bitcoin as we develop our perspective on other cryptocurrencies and crypto-related investments.
Investors looking to accumulate Bitcoin and other assets may wish to view this recent hit to crypto market sentiment opportunistically.
As we have emphasized in the past, Bitcoin is a highly volatile investment. Its value will fluctuate substantially. Smaller crypto assets generally show even greater volatility.
The main appeal of these assets is that they represent emerging technologies and have the potential to grow substantially in value over time.
The path forward, however, is likely to involve many twists and turns. There is also no guarantee whatsoever that any of these assets will be successful in the future.
We suggest investors interested in the space take a long-term view and size their investments judiciously. Do not invest more than you can stand to lose.
If short-term losses of 10% to 20% are unbearable, this could be seen as a sign that one’s level of investment is too great… or that the asset class is not appropriate for the investor.
