Contrary to expectations, the price of Ethereum has dropped despite the Bybit exchange purchasing ETH worth $700 from the open market. Bybit attempted to balance the loss caused by the hack on the exchange where investors lost $1.4 billion worth ETH. Market analysts had expected the ETH price to rise after the hack on February 21. However, the price of ETH has fallen from $2,733.50 to $2,479.85 in the last 24 hours. It is evident that Bybit’s attempts at reversing the effects of the hack have not materialized and the investors’ lost trust in ETH investments could not be regained.
Possible Reasons
There are several possible reasons for ETH’s price drop. Many analysts believe that a purchase of $700 million worth of ETH tokens from the open market was challenging because it was impossible for any over-the-counter (OTC) desk or exchange to have so much crypto liquidity to absorb such a high amount soon. The buying pressure on the Bybit exchange was inevitable. The combined 2% order book depth for ETH across the top 10 exchanges totals around $52 million, which nullifies the narrative that Bybit exchange bought $700 million worth of ETH from the open market.
Many analysts are skeptical about the argument by Bybit Exchange that it recovered a significant portion of the loss through the bridge loans as these bridge loans only have a temporary effect. Even then, the exchange will have to purchase over 400,000 ETH from the open market initially. Analysts are skeptical about whether Bybit could raise so much money in a short period. This doubt would have triggered the price drop as investors anticipate potential losses if they invest in ETH.
Traders were anticipating a large-scale buy of ETH tokens from the open market by Bybit exchange to counter the loss. However, contrary to this expectation, Bybit purchased most of the ETH tokens through over-the-counter (OTC) desks as they provided a sufficient amount of liquidity to meet the demand.
Another point of concern is Ethereum’s adjusted native staking yield being low at 2.4% despite Ethereum’s ETH supply growth having reached 0.6% inflation. Moreover, the chances of including ETH in the US spot Ether exchange-traded funds are uncertain as the proposal is still under review by the US Securities and Exchange Commission (SEC). these uncertainties have also caused the current price decline.
Bybit Hack and Ethereum’s Future
The hack on the Bybit exchange and the theft of money by the infamous Lazarus Group lays open certain vulnerabilities of the Ethereum blockchain, which, if not resolved timely, will cause such hacking attempts in the future too. Ethereum’s future lies in how efficiently the network can identify and mitigate these vulnerabilities. The Ethereum hack on the Bybit exchange highlights associated with complex multisig setups using the Ethereum Virtual Machine (EVM).
The Ethereum wallet has a very complex setup compared to other simple hardware wallets. It also lacks the robust defense mechanisms needed for a wallet of this proportion. Even the most experienced institutional investors who interact with the Ethereum Virtual Machine are therefore likely to incur such huge losses as in the case of the bybit exchange. This problem should be immediately resolved for investors to have renewed trust in Ethereum. The uncertainties regarding ETH’s listing on US Spot ETFs should also be promptly resolved for ETH tokens to rise in price.
The Bottom Line
From a deep analysis of the market, it is clear that the Bybit hack by the Lazarus Group and the theft of $1.4 billion ETH tokens are not the only reasons behind the recent dip in the price of ETH tokens. The developers of the Ethereum project should take proactive measures to foolproof the ecosystem and its transactions so that any chances of hacks in the future are nullified.
