Signal2Noise (S2N) News
Posts
#239: The Largest Hack of All-Time

#239: The Largest Hack of All-Time

Michael Berman, Ph.D.
February 26, 2025

S2N Spotlight

I am kicking myself for not writing about this yesterday. It was on my to-do list but got missed with all my technology hassles. What is interesting is that none of the mainstream media had anything to say and a large part of the crypto community were silent as well.

Shortly after midday UTC on Friday, the world’s second-largest crypto exchange, Bybit, was hacked for $1.4 billion. The exchange described the hack as a “manipulation of the transfer process in our ETH Multisig Cold Wallet during a planned, routine transfer.” Gobeldigook for someone stuffed up or we were collectively outsmarted.

On the weekend, I watched the press release by the Bybit CEO and founder guaranteeing customers from any loss with the exchanges reserves. This is big news and seems largely ignored. Credit to Ben Zhou the billionaire founder for moving fast to allay fears. The hackers are suspected to be linked to a North Korean state sponsored hacking ring. My point is you really need to be paying attention to the risks associated with the world of crypto currency. The market seems to be slowly waking up to some of the risk associated with centralised exchanges. David, your decentralised exchange tip is starting to look even more promising.

I have to admit that I am happy that I wasn’t acting as a market-maker on Bybit over this period. Up until a few months ago I was actively market-making Ethereum Perpetuals on Bybit, so this would no doubt have been a painful weekend for me.

Speaking of selloffs, one of the darlings of the crypto world, Solana, is getting a solid smack at the moment. It is approaching a 61.8% fibonacci retracement of the rally of the last 13 months.

With this backdrop I continue to believe in my short MicroStrategy and long Bitcoin. The “Strategy” premium is likely to fade in my opinion as the froth in the crypto market seeps out and when MicroStrategy stops buying in size to prop the market up. The $31 billion that Saylor has bought has been at an average price of $67k. Watch that number, when the vultures pounce, it will become a bigger magnet than my 6-pack on a sunny Bondi Beach day.

S2N Observations

Junk bond yield spreads are trading near record lows. I have also been commenting how low the MOVE Index is which represents the Bond Volatility Index. Be prepared for volaitlity and spreads to take off from these low levels. We are already witnessing the VIX starting to climb sharply.

One way to trade this is to purchase high-quality treasuries and short high-yielding corporate (junk).

You will see in the Screener Alert section that gold made another all-time high. In this chart I produce a 10-year rollling return of gold and also a counter of how many 10 year rolling return days are below 0%. Because we are experiencing so many all-time highs, it feels like gold is at the top end of its 10-year return profile. However, that golden period was actually the one coming out of the global financial crisis in 2008/9 as it is called in Australia, or the subprime crisis as it was initially called.