Bitcoin Price Holds Up After Largest-Ever Exchange Theft

Bitcoin traded at $77,065 on Friday, down about 4% on the day, after Binance disclosed an exploit affecting roughly $6.3 billion. The decline was smaller than the 8.3% average fall recorded in the 24 hours after previous exchange breaches, according to data from institutional crypto platform Anchorage Digital. Security firm TRM Labs linked the incident to North Korea.

Sam Callahan, director of bitcoin strategy and research at crypto treasury firm OranjeBTC, said the difference comes down to what was hit. "Investors recognize an important distinction: Bitcoin itself was not hacked," Callahan said. "This was a security breach at a centralized exchange, not a failure of the Bitcoin network." He added that the exchange has begun recovering affected assets.

Past exchange failures moved the price harder. Bitcoin fell as much as 23.7% in the 24 hours after an attack on Mt. Gox in February 2014, Anchorage Digital data shows. Bybit lost roughly $1.5 billion in an exploit last year, and Bitget was drained of more than $350 million last month.

Spencer Hallarn, head of markets at crypto trading firm GSR, said this event did not trigger the same loss of confidence seen after earlier incidents. "The speed of Binance's response, its deep financial resources, and its assurances that no user funds would not be lost have helped restore market confidence and prevent potential panic," Hallarn said. Tether, Circle and several other crypto firms said they froze roughly $3 billion in stolen funds. Binance also maintains a $1.2 billion Secure Asset Fund for Users to offset losses from security breaches and other events.

Compass Point analyst Ed Engel wrote in a note to clients Friday that Binance has the liquidity to cover the loss. "We believe Binance has more than enough liquidity to cover the hole and we expect the exchange to remain solvent while reimbursing user funds," Engel wrote. "ByBit also received a bridge loan after its $1.5bn hack last year; therefore, we believe Binance has financing options."

Hallarn also pointed to pressure from technology stocks. Bitcoin has largely moved with equities since the exploit, he said, and the iShares A.I. Innovation and Tech Active ETF was down more than 8% on the day. David Lawant, head of research at Anchorage Digital, said current holders are more likely to keep bitcoin through short-term headwinds than holders of other assets. Just 6% of bitcoin is held in exchange-traded funds, according to data from bitcoin analytics platform Bitbo. "The current holder base is a pretty strong one that is able to look at these things with a slightly longer-term view," Lawant said.

Binance has not published a timeline for completing recovery of the affected assets. No arrests tied to the exploit have been announced.