A Meme Coin Scandal, Exchange Hack, and Market Volatility

A meme coin scandal from a nation state, a record breaking exchange hack, and market volatility—last week was a crazy one.

Despite the LIBRA Scam and the Bybit Hack, Crypto Markets Held Up Relatively Well

The week was framed by significant events influencing the markets: the LIBRA memecoin at the start and the Bybit hack at the end. Following LIBRA’s release, meteoric rise, and rapid downfall, the repercussions of the incident became apparent this week. Javier Milei faces increasing political and legal pressure, with opposition parties seeking his impeachment, lawyers filing fraud charges, and the Anti-Corruption Office initiating an investigation. This situation emphasizes that cryptocurrency has garnered enough significance to impact geopolitics.

The tumultuous week concluded with the crypto exchange Bybit being hacked for $1.4 billion worth of ETH. Ben Zhou, CEO of Bybit, alerted users to the hack earlier on February 21, indicating that the exchange’s Ethereum multisig cold wallet had transferred funds to a warm wallet shortly before. Bybit subsequently faced 350,000 withdrawal requests, but Zhou announced on X that the backlog had been cleared just 12 hours after the incident. Many notable figures in the crypto community praised Zhou and Bybit’s response to this challenge, calling it a “masterclass.” I wholeheartedly concur.

The cryptocurrency market experienced mixed volatility likely triggered by these two incidents. Market sentiment suffered considerable damage following the LIBRA news, which included the information that Milei would be investigated by the FBI. This negative sentiment, combined with overarching economic concerns, led to a decline in Bitcoin’s price on Tuesday. Although Bitcoin rebounded, it fell 3% again after news of the Bybit hack broke. However, the speed of recovery might mirror how effectively Bybit managed this unprecedented hack.

In terms of altcoins, we may finally be reaching a bottom. Altcoins have faced significant downturns over the past month, even as Bitcoin remained relatively stable. Some indicators suggest that specific altcoins might have bottomed out. BERA, a token discussed negatively in last week’s newsletter, has surged approximately 30% since then, gaining traction and attention on social media. Additionally, Bittensor (TAO) increased by 20% over the last week, and 40% from two weeks ago’s lows. Kaito AI, a rising star in the crypto community, launched their KAITO token on February 20. Unlike the prior week’s issues with BERA, the launch of the KAITO token proceeded without the typical initial surge and subsequent drop.

Overall, when major negative events like those framing this week haven’t caused a market crash, it’s hard not to feel optimistic.