Bitcoin shows resilience after USD 6.3 billion Binance hack: Fitch

Bitcoin's relatively contained decline following the USD 6.3 billion Binance hack suggests the cryptocurrency market may have become more resilient to major disruptions, Fitch Ratings said in an assessment released Monday.

Bitcoin fell approximately 6% in the 10 hours following initial reports of the October 29 attack, while trading volumes increased sharply as the market absorbed the disruption.

Fitch said the reaction could indicate that bitcoin liquidity has become less vulnerable to shocks affecting individual cryptocurrency exchanges as trading infrastructure has expanded and diversified.

What happened during the Binance hack?

On October 29, attackers stole approximately USD 6.34 billion in digital assets from Binance wallets across multiple blockchains, according to the exchange. The stolen assets included 18,270 bitcoin, worth around USD 1.5 billion at the time. Binance temporarily suspended withdrawals and began restoring services in phases on November 1.

The incident was potentially the largest cryptocurrency theft recorded, prompting Binance to strengthen security measures and coordinate efforts to freeze stolen assets.

In a November 3 update, Binance said approximately USD 2.85 billion in affected assets had been frozen or intercepted. The exchange also committed to covering the financial impact of the theft through its own resources.

Why does Fitch see greater resilience in bitcoin markets?

Fitch said bitcoin's 6% decline was comparatively contained when measured against the cryptocurrency's reaction to previous major market disruptions.

Bitcoin recorded a 35% daily decline during the COVID-19 market crisis in March 2020, while prices fell approximately 14% following the collapse of cryptocurrency exchange FTX in 2022 and 21% during the Bitstamp hack in 2015, according to Fitch.

The agency noted that broader market weakness and leveraged trading positions also contributed to bitcoin's decline following the Binance incident.

Daily bitcoin trading volume reached approximately USD 40.9 billion, compared with an average of USD 27 billion during the preceding 30 days, according to CoinMarketCap data cited by Fitch.

Fitch attributed the relatively contained disruption partly to the development of deeper and more diversified cryptocurrency trading markets.

The agency said bitcoin's expanding trading ecosystem has reduced reliance on individual exchanges, allowing market participants to access liquidity through alternative platforms when one trading venue experiences operational problems.

This diversification could help limit the impact of exchange-specific incidents, including disruptions affecting Binance, the world's largest cryptocurrency trading platform by reported volume.

What does this mean for bitcoin-backed securities?

Fitch said the incident provided an additional test of market liquidity for securities backed by bitcoin, where the ability to sell cryptocurrency collateral quickly during periods of falling prices is essential to managing financial risk.

The agency emphasized the importance of maintaining sufficient collateral coverage, limiting the time needed to liquidate assets and ensuring access to multiple trading platforms.

Investment structures that depend heavily on a single exchange or service provider could face delays in selling collateral if that platform experiences a cyberattack or operational disruption.

Such delays could increase potential losses during periods of sharp price declines, even when the wider bitcoin market continues operating normally.

The Binance incident also highlighted cybersecurity as an important operational risk, as attacks can temporarily restrict access to assets and interfere with collateral liquidation.

Has Fitch changed its assessment of bitcoin-backed securities?

In a report published in January, Fitch identified bitcoin's substantial reported liquidity and continuous trading as factors supporting the timely liquidation of collateral.

However, the agency also highlighted extreme price volatility, exchange-specific disruptions and regulatory actions as risks that could temporarily constrain or fragment market liquidity.

Fitch said the Binance incident did not change its existing analytical view of bitcoin-backed securities.

Nevertheless, further examination of bitcoin prices, trading volumes and market depth following the attack could provide additional evidence that cryptocurrency liquidity and trading infrastructure have strengthened as the market has matured.