Reasons Behind the Breach and How It Affects the Crypto Market

Bybit Hack Update: Bybit cryptocurrency exchange is facing a severe security incident that has left the crypto community concerned. The Bybit hack, which involved the compromise of a multi-signature cold wallet, has resulted in significant financial losses.

After 1 hour of the Bybit hack, a net outflow of $700 million was reported, following the initial breach of $1.4 billion in ETH from Bybit’s cold wallet. The exchange’s founder, Ben Zhou, has provided updates on the situation, assuring users of the platform’s financial stability. However, the hack’s broader impact on the crypto market continues to unfold.

Reasons Behind the Bybit Hack 

The Bybit hack began with the deployment of a malicious implementation contract on February 19, 2025. Blockchain security firm SlowMist outlined how the attacker used sophisticated methods to exploit vulnerabilities in the exchange’s system. The hacker manipulated the contract by replacing a legitimate multi-signature wallet contract with a malicious one. This manipulation allowed the attacker to gain control over the Ethereum cold wallet used by Bybit, which held a significant amount of ETH.

According to reports from SlowMist, the attacker used backdoor functions in the malicious contract to drain the wallet. These backdoor functions, “sweepETH” and “sweepERC20,” allowed the hacker to transfer large amounts of ETH to an unidentified address. The malicious contract also involved multiple signatures, which masked the attacker’s actions, making it harder to detect.

Ben Zhou, the founder of Bybit, has addressed the situation on x, confirming the breach and emphasizing the impact on Bybit’s cold storage. He stated that the ETH cold wallet was the only one affected, while other wallets remained secure. Zhou also assured customers that their funds were not at risk. However, as the investigation continued, the breach caused widespread concern about the security of cryptocurrency exchanges.

Bybit Founder Ben Zhou Responds To Hack In Livestream

Following the Bybit hack, the exchange’s team, including Ben Zhou, worked alongside blockchain forensic experts to track the stolen funds. Bybit is providing regular updates, aiming to maintain transparency and reassure users. In a live stream, Zhou emphasized that the company was solvent and capable of covering the loss, even if the stolen assets could not be recovered.

Bybit also confirmed that withdrawals and deposits remained functional, with no disruptions to its operations. Zhou stated, “Bybit is solvent even if this hack loss is not recovered. All of clients’ assets are 1 to 1 backed, and we can cover the loss.” The exchange’s ongoing efforts to address the hack included collaborating with other industry leaders for assistance in tracking the stolen funds.

Despite Bybit’s assurances, the hack triggered a wave of user withdrawals. As of writing time, reports indicated that $700 million had been withdrawn from the exchange. This has led to increased concerns about the future of the exchange and whether it can recover from the financial and reputational damage caused by the attack.

Bitcoin, Ethereum, XRP Prices Plummet

The news of the Bybit hack had an immediate effect on the broader cryptocurrency market. Bitcoin and Ether experienced a sharp decline in prices, with Bitcoin dropping to nearly $97,000 and Ether slipping below $2,700.

The Bybit hack, coupled with the market’s sensitivity to security issues, contributed to a downturn in crypto prices, triggering liquidations of leveraged positions.

Additionally, other cryptocurrencies also saw significant losses. XRP, the digital currency associated with Ripple, fell by over 4.5%, reaching a price of $2.58. Similarly, Stellar (XLM) saw a decrease of 4.84%, dropping to $0.3303. Subsequently, the Bybit hack has caused some traders to pull back from high-risk assets, further adding to the downward pressure on the market causing a dip in total crypto market cap by 0.80% to $3.2T.

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Kelvin Munene Murithi

Kelvin is a distinguished writer with expertise in crypto and finance, holding a Bachelor’s degree in Actuarial Science. Known for his incisive analysis and insightful content, he possesses a strong command of English and excels in conducting thorough research and delivering timely cryptocurrency market updates.

Disclaimer: The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.