"The lesson isn't that cryptocurrencies are risky": What the Binance hack teaches investors

The attack on Binance, which resulted in losses of about $6.3 billion, has shown that no company in the crypto industry is too big to be hacked, according to Bloomberg. Analysts and investors warn: funds held on an exchange essentially become an unsecured loan to the platform; even full reimbursement may not protect traders from losses while their funds are frozen, and not all of the stolen assets can be recovered.

The hack has cast doubt on the crypto industry’s ability to protect digital assets, Bloomberg notes. “The lesson for investors isn’t that cryptocurrencies are risky. It’s that funds in an exchange account are an unsecured loan to a company that could lose its [wallet] keys,” the agency quotes Luka Parlamento, founder and chief investment officer of D2 Finance, as saying.

Banks, asset managers, and exchange operators that want to move transactions involving U.S. Treasury bonds, funds, or stocks onto the blockchain must choose a platform for settling those transactions, says Parlamento. Before the hack, betting on the “largest exchange” was a reasonable choice, but even the market leader cannot guarantee the safety of funds, added the founder of D2 Finance.

Following the hack, Binance suspended withdrawals. It promises to cover all losses using the SAFU insurance fund and its own funds. Damon Xu, founder of 1Token, explains what the freeze means for traders. “Even if victims are ultimately fully reimbursed, as long as funds are frozen, a trader may find themselves in a situation where they have profits on one exchange but no access to the money, while on another exchange they face a margin shortfall and forced liquidation of positions,” Reuters quotes him as saying. Xu expects market participants to begin scaling back cross-exchange strategies and to trade with less leverage.

Institutional investors are rushing to withdraw digital assets from centralized exchanges, CoinDesk reports, citing sources. According to Amanda Ha, Chief Investment Officer at ChainUP Investment, as quoted by Reuters, her company has so far sold all of its positions on Binance: “We’re withdrawing everything we can as a top priority. Anything we can’t withdraw, we’re selling and shifting into safe-haven assets, such as stablecoins.”

Bobby Lee, founder of the hardware crypto wallet manufacturer Ballet Global, believes that only the stablecoins will be recovered from the theft, while the bitcoins are most likely “gone.” “They’ve all ended up in the hands of hackers,” he said in an interview with Bloomberg TV.

According to Binance, it has so far managed to freeze approximately $3 billion in stolen assets. However, “freezing assets does not mean recovering them,” Li warns: the exchange will have to work with law enforcement agencies to conduct a lengthy investigation into the incident and seek the transfer of the frozen assets to it.

Bitcoin was trading around $77,600 on Friday afternoon—3% lower than the previous day. Following news of the attack on Binance, both cryptocurrencies and the stocks of related companies fell significantly, notes Jeffrey Kendrick, head of digital asset research at Standard Chartered. “I suspect the price decline isn’t over yet. We’ll only find a new low once the assets are unfrozen and more details about the hack emerge,” CoinDesk quotes him as saying.

Once prices stabilize, Kendrick advises investors to take a look at Uniswap. “This decentralized exchange (DEX) has never been hacked, and following the attack on Binance, the largest centralized exchange, the balance of trading volume should continue to shift in favor of DEXs,” he believes. Kendrick predicts that by 2030, the Uniswap UNI token will rise to $100 from its current price of $7. The expert calls the Binance hack “yet another reason why this forecast may turn out to be an underestimate.”

ViaBTC Chief Analyst Jeff Ko notes that it will be difficult for hackers to quickly sell the stolen bitcoins: every coin can be traced, and there are no major mixers—that is, services designed to obscure transactions—for bitcoin. Therefore, a significant portion of these coins will most likely remain “locked up,” may not enter the market for years, and will not put significant pressure on the price, he believes. Ethereum is easier to “launder,” so sales of it will continue, while the asset itself will lag behind the market, the expert expects.

Bobby Lee of Ballet Global noted that the market has “matured significantly.” “There are trillions of dollars in cryptocurrencies, so losing a billion or two—or $5 billion—in a hack isn’t the end of the world,” he said. It took the crypto market just a few weeks to recover from last year’s Bybit hack, Jeff Ko of ViaBTC pointed out.

On October 29, attackers withdrew approximately $6.36 billion from Binance wallets across ten blockchains, including Bitcoin, Ethereum, Tron, XRP Ledger, and Solana, according to a report by blockchain analytics firm TRM Labs. The exchange confirmed the incident and suspended withdrawals on several networks.

TRM Labs attributes the attack to the TraderTraitor group, which is linked to North Korea. The company bases its conclusion on data from the blockchain and other sources. The same group is responsible for the $1.5 billion hack of the Bybit exchange in February 2025, the report states.

According to TRM Labs, Tether, Circle, Ripple, and World Liberty Financial—a crypto company linked to Donald Trump’s family —have frozen approximately $2.67 billion in stablecoins, while the Arbitrum Network Security Council has frozen an additional $30 million in Ethereum and its own ARB tokens. A total of about $2.7 billion has been locked up, but more than 420,000 Ethereum coins and 18,270 bitcoins worth about $2.4 billion remain under the hacker’s control, along with smaller amounts on other blockchains.

TRM Labs has called the cryptocurrency theft from Binance the largest ever recorded. Even after the stablecoins were frozen, the hackers still have more than they managed to steal in any previous attack, TRM Labs noted.

This article was AI-translated and verified by a human editor