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This Week’s Top Stories

“Bybit Responds to Record-High $1.5 Billion Hack with Professionalism and Transparency” – Friday, 21 February 2025

• Last Friday, approximately $1.46 billion in crypto assets were stolen from Bybit, one of the largest crypto exchanges in the world. ZachXBT was one of the first to report suspicious outflows from Bybit on Friday afternoon, confirming that it was a security incident.
• Shortly after, Bybit’s CEO confirmed the theft on X, communicating that the hacker took control of a specific ETH cold wallet and transferred all ETH in the cold wallet (roughly 400’000 ETH) to an unidentified address. He assured that all client withdrawals were processed as usual.
• Ben Zhou, CEO of Bybit quickly took position and communicated the incident in a livestream (recording here) on the Bybit website, handling the situation in a professional manner and clearing up much of the uncertainty at the time.
• In a statement on X, Bybit explained what happened: They detected unauthorized activity involving one of their ETH cold wallets. The incident occurred when their ETH multisig cold wallet executed a transfer to their warm wallet. Unfortunately, this transaction was manipulated through a sophisticated attack that masked the signing interface, displaying the correct address while altering the underlying smart contract logic. As a result, the attacker was able to gain control of the affected ETH cold wallet and transfer its holdings to an unidentified address.
• Bybit CEO also communicated in the press conference that Bybit will not buy back the stolen ETH right away but will rely on bridge loans from various partners. On Monday, he posted on X that Bybit has already fully closed the ETH gap and is back to a 1:1 backing of all client assets with the help of purchases and loans.
• ZachXBT continued to deliver as he was able to prove that the hack was performed by the LAZARUS GROUP, a North Korean hacker group. His submission includes a detailed analysis of test transactions, associated wallets, forensic charts, and time analysis.
• In the days after the hack, the Lazarus Group started transferring ETH to new addresses in attempt to launder the money through various DeFi protocols.
• On Tuesday, 25 February, Bybit released a preliminary hack forensics report which concluded that the root cause of the attack was malicious code originating from Safe {Wallet}’s infrastructure and that no indication of compromise was identified within Bybit’s infrastructure. Based on the investigation results from the machines of Bybit's Signers and the cached malicious JavaScript payload found on the Wayback Archive, they concluded that an AWS S3 or CloudFront account/API key of Safe.Global was likely leaked or compromised. Safe confirmed the forensic review and communicated that the attack targeting Bybit’s Safe was achieved through a compromised Safe {Wallet} developer machine, resulting in the proposal of a disguised malicious transaction.
• On Wednesday, the FBI confirmed that the North Korean hacker group was responsible for the hack of approximately $1.5 billion in digital assets from the Bybit exchange.

“The U.S. SEC Drops Lawsuits And Investigations Against Various Crypto Players" – This week

• Over the past week, there have been multiple news reports regarding the U.S. Securities & Exchange Commission and the dismissal of lawsuits or the closing of investigations into crypto companies in the U.S. The SEC is truly delivering on their deregulation stance, and the developments of the past few days are very positive for the industry in the coming months and years.
• Coinbase communicated on Friday that the SEC planned to withdraw its lawsuit against the crypto exchange, ending a contentious year-long legal battle once considered existential for the trading platform and the broader sector. Today, the dismissal was officially communicated.
• But not only Coinbase got good news, OpenSea, Robinhood, Gemini, Consensys and Uniswap Labs all received positive news from the SEC this week as well.
• Uniswap published a new feature following the news: fiat off-ramping is now live on their Uniswap wallet. MetaMask also communicated various new features such as the support for native Solana and Bitcoin. There will likely be more features and developments coming, now that there is more regulatory clarity.
• The SEC also published a staff statement on memecoins, in which they clarified that the SEC does not deem most memecoins as securities under U.S. federal law, stating that most memecoins are more like collectibles and often do not have use or functionality. Accordingly, neither meme coin purchasers nor holders are protected by federal securities laws.

“Trump’s Comments on Tariffs and the Hammack’s Remarks on Rates Spooked the U.S. Equity Market” – Thursday, 27 February 2025

• Yesterday, U.S. President Trump said his proposed 25 percent tariffs on Mexican and Canadian goods will take effect next Tuesday, March 4, alongside an additional 10 percent duty on Chinese imports because deadly drugs are still pouring into the U.S. from those countries. Trump additionally threatened to impose 25 percent tariffs on EU goods. Trump’s decisions were published around 19:00 CET yesterday evening, and together with comments from the Fed’s Hammack on the high valuation of U.S. equities and his belief that the Federal Reserve will likely hold rates steady for some time, they sent U.S. equities lower into the close of the U.S. trading session.

A Quick Crypto Overview: The Total Crypto is Market Back at November 2024 Levels

A red week for crypto: the total market capitalization is down almost 20 percent this week and has almost given back all the gains since the U.S. election in November 2024. Bitcoin is trading at $78’400 at the time of writing, and Ethereum is sitting just above $2’000.

Interestingly, the Bitcoin dominance is slightly down for the week, indicating that certain altcoins held up slightly better compared to Bitcoin, although the broad altcoin market is down double-digit percentages as well. Some of the worst performers in the top 100 coins by market cap are down over 55 percent this week alone.

Bitcoin is currently down roughly 30 percent from its all-time high, which was achieved on January 20, 2025, President Trump’s inauguration day. The inauguration indeed turned out to be a sell-the-news event, as investors realized that Trump and his administration’s actions regarding crypto will likely take months to materialize.

In the Weekly Wrap on 17 January, the Friday before Trump’s inauguration, we outlined this possibility in our look ahead. What now?

It might look bad right now, but looking back at previous bull runs, Bitcoin corrections of this order of magnitude (20-30 percent) have accompanied every single bull run in the past. Thinking back to last summer, Bitcoin also experienced a roughly 30 percent correction.

For altcoins, it is a little bit different. Ethereum is currently down almost 50 percent from its December high, and Solana is down almost 60 percent from its January all-time high. While there are other coins, such as XRP or LTC, which are slightly less down, overall, this type of deep correction is a little unusual in bull market environments.

In the chart below, Bitcoin’s 30 percent corrections during the last and this bull run are highlighted.

The question is whether this cycle is different from all the ones before and is truly over or whether this is just another mid-bull-cycle correction. When looking at various top indicators, they suggest that the cycle is not over and that this is indeed just another correction.

Also, when looking at the timing in regard to the halving cycle, the end of the bull market right now would mean that the halving cycle theory is invalidated. While this is a possibility, in combination with the missing signs from the top indicators, the probability is likely rather low.

However, such downward corrections often take a long time to recover from, and given the current macro headwinds, stagflation concerns, tariff talks, and inflation situation in the U.S., it could be that the crypto markets trade sideways over the coming weeks and months as we wait for new catalysts for fresh price movements.

Chart of the Week: Total Market Cap Back at Last Spring’s High

The total market capitalization is back at the same level as one year ago in March 2024, when it put in a multi-month high. It will be interesting to see how it reacts at this same level this time around, as we test it from the upside for a potential support zone.

Let us also look at the S&P 500, which has essentially been trading in a sideways range since Election Day at the beginning of November 2024. The S&P 500 is currently trading at the same level as it was the day after Trump’s election win. In the meantime, it has reached multiple new all-time highs, the last one just last Wednesday.

What’s Happening On-Chain? Pump.Fun Revenue Down Almost 90 Percent Since January

There is not much happening on-chain. The total transaction fees paid on Solana are down 50 percent over the past 30 days. Pump.Fun’s revenue is down almost 90 percent since the end of January, as the chart below shows.

But not only memecoins are going through a rough time on-chain. Virtuals, the launch platform for AI agents, generated only $1’000 in revenue on Wednesday, down from multiple days with over $900’000 in daily revenue in December.

The question here is: Do you think memecoins and/or AI agents will make a comeback? If so, they are currently valued at levels not seen in a long time, and revenues are down alongside the narratives being on hold in the broader crypto space.

While there is a drought in on-chain activity and the broader crypto space in general, some new projects, such as Berachain, Story Protocol, and Kaito, have performed rather well compared to the rest of the market. We mentioned this potential shift toward new and shiny projects in the on-chain section of last week’s wrap.

Digital Asset Fund Flows: Record High Outflows from BTC Spot ETFs

This week, we have been seeing record-high outflows from the BTC spot ETFs, with more than $1.1 billion in net outflows on Tuesday alone. The Bitcoin spot ETFs have experienced net outflows every day since February 18, with more than $2.5 billion in total net outflows this week.

The Ethereum spot ETFs have also experienced net outflows this week, with more than $200 million flowing out of the Ether spot ETFs in total.

In other news, the U.S. Montana House of Representatives voted against a bill on February 22 that could have made Bitcoin a state reserve asset. The bill was opposed by several Republican lawmakers in a 41-59 vote.

According to Bitcoin Laws, among the U.S. states that are considering adding Bitcoin to their state reserves, Utah is currently leading in the Bitcoin reserve race, ahead of Arizona and Oklahoma. In Oklahoma, the respective bill has passed the House of Representatives Committee this week and will now move into the first chamber to be voted on by lawmakers. Utah is only one step away, as the Senate has already passed it.

Montana is not the only state where a respective bill has already failed – North Dakota, Pennsylvania, South Dakota, and Wyoming have all failed to pass their respective bills.

Stay up to date here.

Market Sentiment: Historical Extreme Fear Levels in the Crypto and Stock Markets

This week, the OG fear and greed index for the crypto market dropped to a value of 10, a new multi-year low. The only two times during the last couple of years when it was lower than this week were during the COVID crash and in June 2022, when various players in the space blew up. Only time will tell whether some big players or funds got blown out this week as well.

The U.S. stock market is in extreme fear territory as well, with levels of 18 and 19 this week. In addition to that, over 60 percent of AAII members voted that they are bearish for the stock market in the next six months. To put this into perspective, the last two times over 60 percent of the members were bearish were during the last week of September in 2022 and the first week of March in 2009.

Other Relevant News

• Citadel Securities, led by Ken Griffin, is planning to become a liquidity provider for cryptocurrencies. – Link
• Aya Miyaguchi said she will no longer serve as Executive Director of the Ethereum Foundation and will become President. – Link
• The Democratic Party of the U.S. House of Representatives intends to introduce a bill to ban public officials from issuing meme coins similar to TRUMP. – Link
• Strategy has acquired 20’356 BTC for ~$1.99B at ~$97’514 per Bitcoin. – Link
• Bybit registers with Indian authorities, resuming full services. – Link
• Crypto exchange BitMEX is seeking a buyer and has enlisted investment bank Broadhaven Capital Partners to assist with the sale. – Link
• Bitcoin staking protocol Babylon launched a foundation account and received official reposts. – Link

Looking Ahead: A Lot of Fear & Uncertainty in the Markets

When looking at the market sentiment across crypto and U.S. stock markets, we are seeing historical levels of fear and uncertainty. The bearishness of AAII members reflects this sentiment quite well, with historic bearishness matching the depths of the 2009 crisis. And yet, the S&P 500 is “only” down roughly 4.6 percent from its recent all-time high. It’s difficult to interpret this, but it certainly highlights the uncertainty after Trump’s takeover of the presidential role in the USA.

When it comes to crypto, after we saw a record hack last Friday, this week was accompanied by positive news from the SEC in the U.S., but the market was not able to react positively to the news. It remains to be seen whether the downward move this week was just a risk-off moment alongside the stock market due to macroeconomic uncertainty or whether there was a different, more crypto-specific reason for this move to the downside.

While 20 to 30 percent corrections are nothing abnormal during a Bitcoin bull market, the moves in altcoins are something to keep an eye on, as the market will likely need some time to recover from such large corrections. With that being said, various bull market cycle peak indicators suggest that the top of this cycle is not in yet and that this move is more likely to be a mid-cycle correction.

Below, you can find some of the key data releases and events to watch out for next week.

Monday, 3 March 2025

• Eurozone – Inflation figures

Wednesday, 5 March 2025

• Switzerland – CPI

Thursday, 6 March 2025

• Switzerland – Unemployment Rate
• USA – Initial Jobless Claims, Continuing Jobless Claims

Friday, 7 March 2025

• USA – Unemployment Rate, Nonfarm Payrolls

Saturday, 8 March 2025

• China – CPI, PPI