New Insights from Glassnode: How Bybit's Response to the Lazarus Hack Became a Vital Stress Test for Crypto

New Insights from Glassnode: Bybit's Vital Response to the Lazarus Hack

In the ever-evolving landscape of cryptocurrency, resilience is key. A recent report by Glassnode, a leading on-chain data provider, sheds light on the remarkable recovery of Bybit, the world's second-largest cryptocurrency exchange by trading volume, in the wake of a massive cyber attack by the notorious Lazarus Group. This incident, deemed the largest hack in the history of cryptocurrency, prompted a new era of market stability and investor confidence.

The report, titled "Market Resilience of Digital Assets: A Deep Dive into the Bybit-Lazarus Hack," analyzes the timeline, trading activities, and crucial market data following the unprecedented breach that occurred in February 2025, affecting assets worth $1.4 billion. It further compares the aftermath of this cyber assault with significant disruptions in both the digital asset and traditional finance markets. Interestingly, Bybit’s response did not conform to the historical patterns typically observed during financial crises, marking it as a unique case.

An Unparalleled Recovery

Glassnode’s research highlighted how Bybit’s immediate and efficient operational response played a crucial role in mitigating fears of a market collapse. The company effectively acted in real-time to manage the crisis, demonstrating its ability to absorb shocks that could have led to a broader downturn in the cryptocurrency sector.

After the hack, trading behavior in key cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), and Solana (SOL) was closely monitored. The day following the attack, the open interest in ETH saw one of its largest declines in history due to the extensive liquidations that ensued. However, in a remarkable turn of events, open interest recovered positively within two months, with most values returning to pre-incident levels. As of the report's publication, all three assets had largely regained their status, with BTC reaching a notable high of $8.5 billion in open futures by May.

Liquidity and Market Depth: A Rollercoaster Ride

The hack initially put immense pressure on Bybit’s liquidity, a factor long considered one of its competitive advantages. The market liquidity faced significant stress as spreads between bids and asks widened drastically, resulting in a sharp decrease in market depth. During this period of uncertainty, a record number of withdrawals took place—approximately 350,000 in just 12 hours post-hack.

However, by mid-April, signs of recovery began to emerge. The statistics showed narrowing spreads returning to pre-hack levels with market depth exceeding previous benchmarks by May. This resurgence indicates restored confidence from market makers and a return to normal trading conditions, suggesting a healthy recovery of the trading environment.

Breaking the Cycle of Crisis

One of the most striking revelations in the Glassnode report is that the Bybit hack did not lead to a cascading panic throughout the cryptocurrency industry. Rather, it resulted in a temporary liquidity dip, after which Bybit rapidly regained its operational footing. Glassnode developed a model focusing on two pivotal identifiers: the ratio of internal redistributions and the ratio of withdrawals by large crypto entities. Both indicators experienced spikes following the hack, reinforcing the notion of market resilience.

The report credits Bybit's swift action, transparent communication, and robust internal controls with preventing widespread market contagion and safeguarding user funds. It highlights how the exchange maintained its operational integrity, unlike in past crises such as FTX and Terra, which had devastating impacts on the ecosystem.

A New Benchmark for the Industry

The insights offered by Glassnode contribute to the growing narrative of industry resilience following historical hacking incidents. Bybit not only avoided contributing to a wider market downturn but also set new trading records shortly after the incident, indicating that institutional-level practices have become well-established in digital asset markets. This event may signal a pivotal shift, enhancing investor confidence and expediting the maturation of the cryptocurrency sector.

In conclusion, the Glassnode report encapsulates a crucial moment for Bybit and the broader cryptocurrency market, suggesting that the industry is now better equipped to handle significant disruptions. The resilience demonstrated following the Lazarus hack may inspire confidence and pave the way for a more robust framework for investments in the realm of digital assets. For deeper insights and analysis, users can visit the Glassnode Insights website.