Bybit's Response to Lazarus Hack: A Stress Test for Cryptocurrency Resilience
In the fast-paced world of cryptocurrency, responsiveness is crucial—especially in times of crisis. A recent report from Glassnode has brought Bybit, the world’s second-largest cryptocurrency exchange by trading volume, into the spotlight for its exemplary reaction to the Lazarus hack. This incident, which occurred in February 2025, resulted in a staggering loss of $1.4 billion, marking it as one of the largest security breaches in the history of cryptocurrencies. However, rather than triggering a widespread collapse, Bybit’s rapid response served as a defining moment, illustrating the resilience of both the exchange and the broader crypto market.
The Glassnode report, titled "Market Resilience: A Deep Dive into the Bybit-Lazarus Hack," analyzes the timeline, trading activity, and essential market data following this unprecedented cyberattack. It compares the incident with significant events in both digital and traditional financial markets, further establishing the unique challenges faced by the cryptocurrency industry.
Despite historical patterns associated with financial crises leading to lasting damage, the aftermath of the Lazarus hack displayed a remarkably different scenario—thanks to Bybit’s adept handling.
The report delves into the performance of three critical assets traded on Bybit: Bitcoin (BTC), Ethereum (ETH), and Solana (SOL). Following the hack on February 22, there was an immediate and significant reduction in open positions, mainly for Ethereum, attributed to widespread liquidation and forced margin calls. However, crucially, the subsequent two months saw a paradigm shift; the recovery in the number of open positions turned predominantly positive. By early May 2025, both BTC and SOL had surpassed pre-hack levels, with Bitcoin achieving a record $8.5 billion in perpetual open positions.
Analysts noted, "Despite the tumultuous backdrop, trading volumes for Ethereum remained robust. Even after the hack, Bybit’s volumes peaked at an all-time high of $8.5 billion per day, showcasing traders’ renewed confidence in the platform."
Liquidity, a cornerstone of Bybit's competitive edge, experienced short-term stress, evident in widened bid-ask spreads and diminished market depth. The exchange witnessed over 350,000 withdrawals within 12 hours post-hack, further exacerbating concerns about its immediate stability. Yet, resilience prevailed. By mid-April, the liquidity indicators began to stabilize, with spreads reverting to pre-incident levels and market depth surpassing prior figures by May. This recovery is a testament to the resilient trust from active market participants, signaling a return to normal trading conditions.
Rather than triggering panic or systemic failure, the impact of the Bybit hack was short-lived, highlighting the exchange's capacity to manage crises effectively. To gauge operational stability following the incident, Glassnode developed its operational stability models based on two key metrics: the Internal Reshuffle Ratio and the Whale Outflow Ratio. Each of these metrics demonstrated peaks immediately after the hack, followed by a return to normal levels, underscoring Bybit's effective crisis management strategies.
The report attributes the containment of spillover effects to Bybit’s proactive communication, swift operational response, and strong internal controls. These measures effectively safeguarded customer funds and maintained the integrity of the trading platform, averting a broader industry catastrophe.
What sets this incident apart is its illustration of an evolving resilience within the cryptocurrency sector. Bybit’s management of the aftermath diverges starkly from previous crises, such as FTX and Terra, which led to widespread market distress. Instead, Bybit’s handling of the scenario not only mitigated potential market damage but also witnessed key assets achieving new trading records. This response underscored the maturation of institutional practices within the digital asset landscape.
This moment signals a significant evolution in the ability of cryptocurrencies to absorb substantial shocks, potentially enhancing investor trust and catalyzing industry growth. As the cryptocurrency ecosystem continues to develop, Bybit emerges as a pivotal player in setting standards for operational resilience.
For further insights and findings, visit Glassnode Insights.
The Context of the Hack
The Glassnode report, titled "Market Resilience: A Deep Dive into the Bybit-Lazarus Hack," analyzes the timeline, trading activity, and essential market data following this unprecedented cyberattack. It compares the incident with significant events in both digital and traditional financial markets, further establishing the unique challenges faced by the cryptocurrency industry.
Despite historical patterns associated with financial crises leading to lasting damage, the aftermath of the Lazarus hack displayed a remarkably different scenario—thanks to Bybit’s adept handling.
Recovery and Market Behavior
The report delves into the performance of three critical assets traded on Bybit: Bitcoin (BTC), Ethereum (ETH), and Solana (SOL). Following the hack on February 22, there was an immediate and significant reduction in open positions, mainly for Ethereum, attributed to widespread liquidation and forced margin calls. However, crucially, the subsequent two months saw a paradigm shift; the recovery in the number of open positions turned predominantly positive. By early May 2025, both BTC and SOL had surpassed pre-hack levels, with Bitcoin achieving a record $8.5 billion in perpetual open positions.
Analysts noted, "Despite the tumultuous backdrop, trading volumes for Ethereum remained robust. Even after the hack, Bybit’s volumes peaked at an all-time high of $8.5 billion per day, showcasing traders’ renewed confidence in the platform."
Liquidation and Recovery
Liquidity, a cornerstone of Bybit's competitive edge, experienced short-term stress, evident in widened bid-ask spreads and diminished market depth. The exchange witnessed over 350,000 withdrawals within 12 hours post-hack, further exacerbating concerns about its immediate stability. Yet, resilience prevailed. By mid-April, the liquidity indicators began to stabilize, with spreads reverting to pre-incident levels and market depth surpassing prior figures by May. This recovery is a testament to the resilient trust from active market participants, signaling a return to normal trading conditions.
Industry Impacts
Rather than triggering panic or systemic failure, the impact of the Bybit hack was short-lived, highlighting the exchange's capacity to manage crises effectively. To gauge operational stability following the incident, Glassnode developed its operational stability models based on two key metrics: the Internal Reshuffle Ratio and the Whale Outflow Ratio. Each of these metrics demonstrated peaks immediately after the hack, followed by a return to normal levels, underscoring Bybit's effective crisis management strategies.
The report attributes the containment of spillover effects to Bybit’s proactive communication, swift operational response, and strong internal controls. These measures effectively safeguarded customer funds and maintained the integrity of the trading platform, averting a broader industry catastrophe.
A Shifting Paradigm
What sets this incident apart is its illustration of an evolving resilience within the cryptocurrency sector. Bybit’s management of the aftermath diverges starkly from previous crises, such as FTX and Terra, which led to widespread market distress. Instead, Bybit’s handling of the scenario not only mitigated potential market damage but also witnessed key assets achieving new trading records. This response underscored the maturation of institutional practices within the digital asset landscape.
This moment signals a significant evolution in the ability of cryptocurrencies to absorb substantial shocks, potentially enhancing investor trust and catalyzing industry growth. As the cryptocurrency ecosystem continues to develop, Bybit emerges as a pivotal player in setting standards for operational resilience.
For further insights and findings, visit Glassnode Insights.
Topics Financial Services & Investing）
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