Bybit Hack, Inflation Data Bring Bitcoin Down

The $1.5 billion Bybit theft and the highest inflation expectations in a decade hit bitcoin and cryptocurrencies. What's next for the market?

The price of bitcoin fell 2.16% on Friday, closing at $96,181, affected by the Bybit hack, which lost $1.5 billion worth of Ether (ETH), and worrying US economic data, which showed rising inflation expectations and a drop in consumer confidence. We analyze how these events impact the market and what to expect in the short term.

The price of bitcoin closed on Friday at $96,181, below the EMA50 ($97,800), indicating a loss of bullish momentum in the short term. / Tradingview

Bybit Hack: A Devastating Blow to Crypto Confidence

The Bybit cryptocurrency exchange, one of the largest in the world, suffered a sophisticated cyberattack on Friday, perpetrated by the hacker group Lazarus. The theft included more than $1.5 billion worth of Ether (ETH) and MegaETH (mETH) in liquid stake. This sparked panic in the crypto community and led to a 4% drop in the price of ETH.

Bybit CEO Ben Zhou confirmed that the attack compromised the platform's multi-signature ETH cold wallet. This incident not only affected confidence in Bybit, but also raised concerns about the security of other exchanges and the ecosystem's ability to protect itself against high-level attacks. The price of bitcoin was also affected by the fear unleashed after the negative Bybit event.

US Economic Data: Inflation and Distrust Hit Bitcoin

The economic data released this Friday also played a key role in the fall of bitcoin. The Michigan Consumer Sentiment Index for February registered a value of 64.7, well below the consensus of 67.8 and the previous figure of 71.1. This is the lowest level since July 2024, reflecting widespread pessimism about the economy.

Additionally, 5-year inflation expectations hit 3.5%, the highest level in a decade, beating the consensus of 3.3%. This rise in inflation expectations suggests that consumers anticipate higher prices in the future, which could lead the Federal Reserve (Fed) to keep interest rates high for longer. As long as rates remain high, cryptocurrencies will have a hard time rising.

Bitcoin as a risk asset: Correlation with the Russell 2000

Bitcoin, currently correlated with the Russell 2000 index, reacted as a risk asset to the economic data. The combination of weak consumer sentiment and higher inflation expectations generated risk aversion in the markets, which resulted in a drop in the price of bitcoin and other cryptocurrencies.

The price of bitcoin closed on Friday at $96,181, below the EMA50 ($97,800), indicating a loss of bullish momentum in the short term. The cryptocurrency failed to confirm the breakout of that moving average that occurred the day before, so it was rejected. However, it remains above the EMA100 ($94,000) and the EMA200 ($85,400), suggesting that the medium- and long-term trend remains bullish.

Likely scenarios for Bitcoin and other cryptocurrencies

1. Short-term: Consolidation and correction

• The key support at $92,400 will be crucial. If it breaks, we could see a correction towards the EMA200 ($85,400).
• Negative flows into Bitcoin ETFs ($-489.60 million in 3 days) and long position liquidations ($199.23 million) exert downward pressure.

1. Medium-term: Recovery and accumulation

• If the price stays above $92,400, there could be a recovery towards the EMA50 ($97,800) and the resistance at $106,200.

1. Long-term: Bitcoin as a safe haven against inflation

• Higher inflation expectations could increase Bitcoin's appeal as a safe haven asset, especially if the dollar loses strength.
• However, risk aversion in the short term could limit bullish movements.

A market in transition

The Bitcoin market faces a complex outlook, with downward pressures from the Bybit hack and negative economic data. However, it still has bullish potential in the medium and long term due to its role as a hedge against inflation. Investors should keep an eye on the support at $92,400 and the resistance at $106,200, as these levels will define the next significant move.

Disclaimer: This analysis does not constitute financial advice. Cryptocurrencies are volatile assets; invest with caution and do your own research before making decisions.