Ethereum Plunges After $1.5B Bybit Hack

Ethereum's price has been under significant selling pressure, trading around $2,650, following a major security breach at Bybit. The incident has left traders uneasy, prompting many to seek protection against further price declines. Gordon Grant from COINOTAG attributed this shift in sentiment to the diminished protection against downside risks and the potential liquidation of hacked ether.

Ethereum's value has declined notably, trading at approximately $2,650, down by 5% over the last 24 hours. This drop comes in the wake of a significant security breach at the Bybit cryptocurrency exchange, which has invoked widespread concern among traders and investors. Reports indicate that the incident resulted in the theft of about 401,000 ETH, valued at an estimated $1.5 billion, suggesting a growing apprehension in the market as traders assess the fallout from the hack.

The Bybit attack, believed to involve the Lazarus Group, showcases the vulnerabilities within the cryptocurrency landscape and the potential for heightened regulatory scrutiny. With the hacker now holding enough stolen ether to rank as the 14th largest holder, the implications for market stability are profound. After the event, derivatives trader Gordon Grant remarked that the combination of external threats and dwindling protection is shifting risk dynamics in the options market, highlighting traders' shift towards securing their positions against further downturns.

In the aftermath of the Bybit hack, the options market for Ethereum has reflected an increase in bearish sentiment. Analyses by QCP Capital reveal that risk reversals in ether options indicate a growing anxiety over potential price declines, particularly as traders approach March expirations. As the demand for puts outstrips calls, there is a clear indication that investors are prioritizing protective strategies to safeguard their portfolios. The spike in one-week 25-day risk reversals to as much as 15 volatility points over puts underscores this trend.

Market reactions have seen one-week at-the-money volatility surge from approximately 50 to nearly 65, as traders exhaust existing downside protections. The derivatives data suggest a strategic pivot as investors reassess their exposure in light of the substantial risks introduced by the Bybit incident. Traders are increasingly positioning themselves for further selling pressure, reflecting a broader trend in risk-averse trading behavior.

As the market digests the implications of