Bitcoin dropped below $77,000 for the first time in more than a month on Friday, extending a broader cryptocurrency sell-off after Binance Holdings suffered what is being described as the largest crypto theft on record. The breach has raised fresh concerns about the security of customer assets and the ability of even the world's largest cryptocurrency exchange to protect its systems.
The world's biggest cryptocurrency fell as much as 3.1% to $76,300 during Friday's trading in New York before recovering some of its losses. Other digital tokens also declined, including Binance's BNB, which shed around 7% since Wednesday to trade near $700.
The sell-off followed a security breach at Binance in which attackers stole an estimated $6.3 billion in digital assets. The incident has renewed scrutiny of the cryptocurrency industry's security infrastructure, which has struggled for years to overcome concerns over hacking, scams and exchange failures.
The attack is particularly significant given Binance's scale, with more than $135 billion worth of assets held on its platform.
Binance sets aside $6.34 billion to cover losses
Binance said on Friday that it had reserved more than $6.34 billion in company funds to cover losses arising from the incident. The exchange also pledged to compensate users for the stolen assets and said it was working with law enforcement agencies and industry partners to recover the funds.
The exchange has already managed to freeze approximately $3 billion in affected assets with assistance from blockchain intelligence firms and other industry participants.
Binance's co-CEO Richard Teng said the company would cover all losses using its own funds and reserves. He also clarified that the breach affected the exchange's own internet-connected hot wallet, while customer assets were not directly affected.
According to Binance's initial investigation, the attackers may have gained access through a compromised employee laptop. The subsequent investigation identified additional points of breach. The hackers reportedly exploited Ethereum's EIP-7702 account-delegation feature to bypass normal approval controls and access a hot wallet. They also used a self-destruct mechanism to erase traces of their activity.
Blockchain intelligence firms Chainalysis and TRM Labs have linked the attack with high confidence to TraderTraitor, a hacking group associated with North Korea. Binance, however, said it was working with law enforcement partners to confirm the identity of those responsible.
The exchange temporarily suspended withdrawals while investigating the breach and rebuilding its systems. It said withdrawals would resume only after the necessary security checks were completed.
The Federal Bureau of Investigation (FBI) told Bloomberg News that it was aware of the incident and was coordinating with its partners to understand the scope of the activity, assess potential impacts and determine appropriate investigative steps.
The US Secret Service also said its investigators were working continuously with private-sector partners to trace and recover the stolen funds.
Stablecoin issuers freeze billions in assets
The response from cryptocurrency companies was swift after the breach came to light.
Tether chief executive Paolo Ardoino said the company had frozen more than $1.5 billion worth of its stablecoin in connection with the potential Binance hack.
Circle Internet Group chief executive Jeremy Allaire separately announced that approximately $800 million worth of its USDC stablecoin had been frozen amid reports of the security breach.
The actions by the two largest stablecoin issuers were seen as significant because of the speed with which they responded to the incident and attempted to prevent the stolen assets from being moved further.
Eric Jardine, head of research at Chainalysis, described the response as an impressive achievement, considering how quickly the incident unfolded.
The recovery efforts have nevertheless raised questions about the extent to which stolen cryptocurrency can be traced and frozen once it moves across different blockchain networks and decentralised platforms.
Analysts divided over Bitcoin's next move
Market analysts have offered differing assessments of the impact the Binance breach could have on Bitcoin and the wider cryptocurrency industry.
Jeff Ko, chief analyst at ViaBTC, said the broader cryptocurrency market was already displaying bearish sentiment, which helped the sell-off spread quickly across digital assets. He added that Binance had sufficient resources to absorb the losses.
Haseeb Qureshi, managing partner at venture capital firm Dragonfly, said cryptocurrency remained a target for malicious actors and that cybersecurity systems across the industry were being tested.
"It's staggering to see the impact of that at the largest exchange in the world," he said.
Will Tamplin, senior analyst at Fairlead Strategies, suggested Bitcoin could experience further declines in the coming days as investors assessed the implications of the breach. However, he described the downturn as a potential opportunity to increase exposure to the cryptocurrency.
Matt Maley, chief market strategist at Miller Tabak Co., was more cautious, warning that the incident could discourage institutional investors from entering or expanding their exposure to digital assets.
"The scenario that raises the biggest concerns is that this episode could cause institutional investors to step back from the asset class," he said.
He added that institutional demand would be crucial to the future of cryptocurrency markets and that concerns over operational security and counterparty risks could prompt large investors to reconsider their positions.
Noelle Acheson, who writes the Crypto is Macro Now newsletter, said repeated security breaches across the industry could discourage new investors from entering the market.
She pointed out that recent incidents had raised concerns over the safety of both self-custody and exchange-based storage, while the growing threat of artificial intelligence-powered cyberattacks could make online security increasingly challenging.
However, Acheson also noted that every major security breach could ultimately lead to stronger security systems across the industry.
Broader market weakness adds to crypto sell-off
The Binance incident came at a time when Bitcoin and other digital tokens were already under pressure from wider economic and financial market developments.
The S&P 500 was down approximately 2% during mid-afternoon trading in New York on Friday, while the technology-heavy Nasdaq 100 fell nearly 4%.
Disappointing earnings and outlooks from major companies, including Amazon.com and Intel, contributed to the weakness in US equities, adding to the risk-averse mood among investors.
Bitcoin had remained around the $80,000 mark for much of the week before the latest sell-off intensified.
The expiry of cryptocurrency options worth approximately $11 billion on the Deribit platform on Friday also weighed on sentiment. The expiry added to market uncertainty as traders adjusted their positions amid broader selling pressure.
According to data from Coinglass, approximately $1.3 billion worth of bullish cryptocurrency positions were wiped out over a 24-hour period.
The scale of the liquidations further intensified the decline, particularly among traders who had borrowed money or used leverage to bet on rising cryptocurrency prices.
The Binance breach has therefore added another layer of uncertainty to an already weak market, with investors assessing both the immediate financial consequences and the possibility of further security failures.
For the cryptocurrency industry, the incident has once again brought the issue of trust to the forefront. While Binance has promised to cover the losses and recover stolen funds, the scale of the breach could have longer-term consequences for investor confidence, particularly if institutional investors begin to question the safety of holding digital assets on centralised exchanges.