- ETH Drops 5% Despite Bybit’s $740M Buy: Traders expected a price rebound after Bybit’s recovery efforts, but most transactions were done OTC, reducing open market buying pressure.
- Bybit Hack Exposes Ethereum Security Risks: The breach highlighted vulnerabilities in Ethereum’s multisig setups, raising concerns about institutional security and fueling market uncertainty.
- Leverage Traders Misjudged the Market: ETH futures open interest dropped from 8.82M to 8.52M ETH, as traders closed positions manually, leading to no significant short squeeze.
Ether ($ETH) took a 5% hit on Feb. 24, despite reports that crypto exchange Bybit scooped up $740 million worth of ETH from the open market. Many traders expected a price bounce following the Feb. 21 hack, thinking Bybit’s recovery efforts would push ETH higher—but that never happened.
Bybit Hack—What Really Went Down?
Bybit CEO Ben Zhou revealed that the attack was stealthily disguised as a legitimate transaction, but contained malicious source code that rewrote smart contract logic to siphon funds.
- The hack is reportedly linked to Lazarus, North Korea’s notorious cybercrime group.
- These attackers don’t typically liquidate stolen assets quickly, as their wallets are tracked and blacklisted by major exchanges.
So, regardless of what the hacker planned to do with the stolen ETH, analysts pointed out that heavy buying pressure was inevitable. Why? Because there simply wasn’t enough liquidity to absorb such a massive buy order on any OTC desk or exchange.
JUST IN:
— BlockNews (@blocknewsdotcom) February 24, 2025Ethereum order books are seeing EXTREME amounts of short bids
$1,900,000,000 in $ETH shorts will be liquidated if price reclaims $2,943
Only $121,000,000 in $ETH longs will be liquidated if price drops below $2,204
Nearly a 10x disparity in bearish betspic.twitter.com/zUIylM2b3U
Traders Misread the Market—Short Squeeze Now Unlikely?
Vance Spencer, co-founder of Framework Ventures, noted that bridge loans given to Bybit were temporary—meaning over 400,000 ETH would eventually need to be bought back on the open market.
- Lewi from Perennial Labs also anticipated a short squeeze, expecting Bybit’s recovery to drive ETH higher.
- But that didn’t happen. Instead, traders who had bet on a price surge had to unwind their positions.
ETH Traders Close Positions—No Forced Liquidation Spike
Between Feb. 21 and Feb. 23, ETH rallied 6.7%, momentarily testing $2,850 resistance. But by Feb. 24, it had completely erased those gains, crashing to $2,650.
- Bybit confirmed it had already recovered over 50% of the stolen ETH.
- Most transactions were done OTC, meaning open market buying pressure was lower than expected.
- Ether futures open interest dropped from 8.82M ETH to 8.52M ETH in just 24 hours.
- Despite the decline, forced liquidations were only $34M, meaning most traders manually closed leveraged positions.
This suggests that expectations—not actual buying activity—were driving the hype.
source: CoinGlass
The Bybit Hack Exposes Ethereum’s Multisig Risks
The Bybit breach rattled investor confidence in Ethereum’s security setup.
- The hack exposed weaknesses in complex Ethereum multisig implementations.
- Many now argue that hardware wallets remain safer, even for institutions handling billions in assets.
Another growing concern? ETH’s low staking yield.
- Adjusted staking yield: 2.4% (compared to Solana’s 4%)
- ETH supply growth: 0.6% inflation
- US spot ETH ETFs under SEC review, but staking integration remains uncertain
Final Thoughts—Why ETH Struggled
ETH’s recent struggles aren’t just about the Bybit hack. A mix of overconfidence from leveraged traders, uncertainty over US spot ETF staking integration, and questions about Ethereum’s security architecture all played a role.
For now, the hype around a short squeeze has faded, and ETH’s next move depends on how the market digests these ongoing risks.
