Crypto market under pressure after largest hack ever

 

Every week, Amdax summarizes what’s happening in the crypto market for you. Want to dive deeper? Click on the links in this email for more insights.

This newsletter is a co-production with our partner, Bitcoin Alpha. 

Market Update 

Stay informed in three steps:

1. Bitcoin drops around 10%, altcoins hit harder 

Between Sunday evening and Tuesday afternoon, the crypto market saw a sharp decline. Bitcoin lost about 10%, dropping to $86,000, while most altcoins fell by 15-25%. This downturn occurred during a sideways or slightly downward movement, highlighting the fragile sentiment among investors.

2. Negative news weighs on market sentiment

Two major events added to the uncertainty: the $1.4 billion hack at Bybit and a $500 million fine for OKX from U.S. authorities. While these incidents do not undermine the legitimacy of the crypto sector, they do discourage traditional investors. This is reflected in capital flows within spot crypto ETFs.

3. Record outflows from U.S. bitcoin funds

In total, $937.7 million flowed out of spot Bitcoin ETFs in a single day. This is the largest capital outflow since the introduction of these funds in January 2024. The outflow highlights growing uncertainty among traditional investors, who are becoming more cautious due to recent developments and the market’s unclear direction. 

News Overview

Signal from the noise:

• The SEC drops its lawsuit against Coinbase. The regulator had accused Coinbase of offering securities without proper registration but has now withdrawn the case, signaling a softening stance on U.S. crypto policy. Coinbase CEO Brian Armstrong called it a “big day” and praised the support for innovation. On X, Armstrong reiterated his criticism of the SEC under Gensler. Analysts view the SEC’s decision as confirmation of an expected shift in digital asset regulation. 
• SEC abandons appeal over the ‘dealer rule’ expansion. The proposed rule would have placed certain DeFi protocols, market makers, and OTC traders under stricter securities regulations, increasing the SEC’s control over the crypto market. A federal judge ruled that the SEC had overstepped its mandate. By het intrekken van het beroep withdrawing its appeal, the SEC effectively ends this legal battle. This move aligns with a broader trend of decreasing regulatory pressure on the sector.
• FTX creditors get their money back—but miss out on gains. This week, small creditors (with claims up to $50,000) received full reimbursement with interest for funds held on FTX. However, since the payouts are in dollars rather than crypto, they miss out on significant potential gains. For example, someone who owed one bitcoin in November 2022 receives less than $20,000, while that same BTC is now worth over $95,000. In fiat terms, they are made whole, but in purchasing power, the settlement remains a painful deal.
• Chainalysis reports that sanctioned countries like Iran and Russia received nearly $16 billion in crypto in 2024. This amount represents 39% of all illicit crypto transactions. According to the report, these nations use crypto to bypass Western sanctions and access international markets. The U.S. is attempting to counteract this through sanctions on intermediaries facilitating transactions for Iranian and Syrian networks. Regardless, the data highlights crypto’s growing role in geopolitical financial flows.
• More than 50 major companies outside the crypto space are building on Ethereum. A new report from Galaxy Digital reveals that banks, luxury brands, and other industries are utilizing Ethereum and Layer 2 solutions for NFTs, tokenized assets, and scalable infrastructure. The financial sector is actively experimenting—10 banks are working on tokenizing assets like money market funds and government bonds. Ethereum is increasingly serving as a bridge between traditional finance and decentralized technologies. 

Amdax’s Take

Despite the sharp decline, the broader upward trend of this bull market remains intact. Sharp corrections are part of a rising market and are often temporary panic reactions. The outflows from U.S. bitcoin funds indicate that institutional investors are currently in wait-and-see mode, but once the market regains direction, sentiment can shift quickly. At the same time, we see a positive shift in U.S. policy: the SEC is dropping lawsuits, and regulatory pressure is easing. This supports the structural growth of the sector, with adoption and institutional involvement continuing to rise.