Key Takeaways
- Bybit’s $1.48B hack triggered panic withdrawals, draining billions from the exchange.
- Bitcoin price dropped 20% below its ATH, pushing new investors into unrealized losses.
- Market sentiment weakened, leading to a sharp downturn across major cryptocurrencies.
The crypto market was shaken on February 21, 2025, when Bybit suffered a massive security breach, resulting in the theft of 403,996 ETH (~$1.13 billion). The attacker exploited smart contract permissions to reroute funds, draining a total of $1.48 billion in assets. Bybit CEO Ben Zhou confirmed the breach involved a “Musked UI” attack, tricking signers into approving malicious transactions.
The hack impacted multiple assets:
- Ethereum (ETH): 403,996 ETH stolen
- Staked Ethereum (stETH): 91,076 stETH stolen
- mETH: 8,000 mETH stolen
- cmETH: 15,000 cmETH stolen
While Bybit assured users that other cold wallets remained secure, the incident triggered mass withdrawals and market-wide sell pressure.
Bitcoin Sell-Off and Exchange Outflows
According to the report from Glassnode, Bybit users withdrew money in a frenzy, which drained reserves substantially. Between February 21 and 24, Bitcoin reserves at Bybit went down by 21,248 BTC, while reserves in USDT dropped by $1.76 billion. Ethereum reserves dropped initially before experiencing some bounce with $1.58 billion worth of deposits.
Overall market reaction was dramatic. Bitcoin dropped from its historical high at $109K to $87K, a 20% drop. Because BTC is 5% undervalued from short-term holders’ (STHs) cost basis, new buyers took on deeper losses. Ethereum and Solana followed suit, dropping 22.9% and 40% each. The Meme Coin Index crashed 36.9%, reflecting a high-risk aversion sentiment.
Investor Sentiment Hits Low
Bitcoin cost basis distribution identified a liquidity deficit in between $70K and $88K, which raised downside risks. The weakening in price momentum as longer-term holders started selling compounded the post-hack decline.
Short-term holders (STHs) experienced increasing losses with a decline in the STH-MVRV ratio to 0.95, which represents 5% mean unrealized
Measuring whether short-term holders sell at a profit or at a loss, STH-SOPR also dropped below critical thresholds, which is a signal that short-term holders are realizing at a loss. Historically, these have marked capitulation or a sustained correction.
Meanwhile, as Bybit struggled to rebuild its reserves, Bitcoin outflow from the platform amounted to $2.47 billion, with $2.25 billion worth of USDT also flowing out. Liquidity is drying up, investor sentiment is battered, and the market is susceptible to more downside until a solid catalyst comes in.
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