Binance Hack: Why Bitcoin Didn't Crash Like It Did in 2018

The market's resilience against the record-setting Binance hack, which saw the exchange lose approximately $6.4 billion, is notable because Bitcoin only decreased by around 3%, contrasting sharply with the nearly 11% decline seen in 2018 during the exchange's prior attack.

Following the massive breach, Bitcoin dropped to approximately $76,400 on Friday, representing a decline of about 6% from its level after the Federal Reserve's decision. Furthermore, more than $1.3 billion in leveraged positions were liquidated, which occurs when trades using borrowed capital are automatically closed by exchanges due to adverse price movements. Despite this, Bitcoin has remained relatively stable given the circumstances.

In March 2018, an attempted breach on the same exchange resulted in a swift drop of nearly 11% in the price, although Binance at that time stated that no funds were actually stolen. Binance confirmed the recent attack, and analyses from Chainalysis and TRM Labs estimate the theft amounted to roughly $6.4 billion, which is more than four times the value of the previous record theft, the $1.5 billion Bybit heist in February 2025.

The crypto market's total valuation has increased from exceeding $400 billion in March 2018 to roughly $2.6 trillion presently. A significant factor contributing to this growth, and to why markets do not react to panic in the same manner as before, is the introduction of U.S. spot Bitcoin ETFs. These vehicles, such as BlackRock’s iShares Bitcoin Trust, enable individuals to acquire Bitcoin through a standard brokerage account, and these funds now hold about 1.3 million BTC, which constitutes roughly 6% of the total supply.

The 2018 incident involved a phishing and theft attempt where attackers gained control of accounts, created API keys—which allow trading bots to operate on an account—and utilized these to inflate the obscure coin Viacoin while 31 accounts holding the coin were selling it. During that event, Bitcoin plummeted from $10,740 to $9,690 within minutes and continued to fall to about $6,600 by April 5, even though the market was already experiencing a downturn after peaking near $20,000 in December 2017.

For context, the entire cryptocurrency market was valued at just over $400 billion in March 2018, whereas it is valued at roughly $2.6 trillion now.

The theft commenced at 4:05 p.m. ET on Thursday, subsequent to the closing of U.S. exchanges. Preliminary ETF inflows of $17 million on Thursday occurred before this event, and the flow figures for Friday represent the initial genuine indication of whether those holders are divestmenting. The perpetrator currently possesses over 420,000 ETH and 18,270 BTC, totaling about $2.4 billion, which cannot be frozen by any stablecoin issuer. This figure excludes other digital assets, which would elevate the holdings to surpass $3 billion. TRM and Chainalysis attribute the attack to the North Korean group associated with Bybit, which subsequently converted approximately 84% of the stolen Ethereum into Bitcoin via Thorchain, a network facilitating cross-chain swaps.

Binance has committed to setting aside more than $6.34 billion from its corporate funds to cover all losses; moreover, it is acquiring the missing tokens both on public exchanges and through private over-the-counter arrangements. Approximately $3 billion is currently frozen, deposits are functioning normally, and withdrawals are anticipated to resume within 45 hours.

Market sentiment was already subdued prior to the theft, and it worsened further: CoinMarketCap’s Fear and Greed index, a gauge charting market mood on a scale of 0 to 100, fell to 36 points from 43, moving into the "fear" zone from "neutral" the previous day. Bitcoin is currently trading about 38% below its record high of $126,080. In contrast, when the incident occurred in 2018, the market was situated in "extreme fear" territory at a reading of 12 on that scale. Traders were already reacting with alarm, and the attack only exacerbated an already unfavorable situation.

Data from Glassnode indicates that long-term holders are underwater on roughly 4 million coins purchased between $85,000 and $118,000. HashKey analyst Tim Sun stated before the hack that the core issue facing the market "is not panic selling, but rather insufficient new buying interest."

Considering all these factors, the outcome suggests that a combination of elements played a role in preventing a global panic for Bitcoin despite the unprecedented hack. These elements likely included a more optimistic market climate, increased liquidity, the presence of active long-term investors, a more defined regulatory structure, a feeling of security derived from that regulatory clarity, swift responses from stablecoin providers, and a likely upward trajectory in price recovery.

Shareholders of certain funds, like those from sovereign wealth funds such as Mubadala and the Abu Dhabi Investment Council, do not keep their coins on Binance; these entities have been actively purchasing. Data from Farside Investors shows that BlackRock’s fund alone received $136 million on Wednesday. These types of funds typically do not engage in panicked selling and tend to hold their assets for extended durations.

The theft began after U.S. markets closed on Thursday, at 4:05 p.m. ET.