Financial Analyst/Content Writer, RADEX MARKETS
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
SAHAM
The world’s largest crypto exchange is in the midst of a catastrophic security breach. Late on Thursday evening, Binance confirmed ‘our teams are aware of reports of a potential security issue and are actively investigating’, following which the exchange informed users that withdrawals would be suspended until the issue had been resolved. An official figure for the total loss has not been confirmed as of yet, but estimates place the size of the hack at a staggering $6 billion. Former Binance CEO Changpeng Zhao reassured users that funds were safe, while co-CEO Yi He said that the platform would cover ‘all hacking losses’. The latest investigation into the matter suggests the incident ‘may involve a compromised DevOps engineer’s laptop, which allowed an attacker to gain access to a service container and submit unauthorized withdrawal transactions’, although the exact nature of the attack has not yet been confirmed.
The hacker’s wallet held roughly $1.5 billion worth of Bitcoin, $900 million in Ether, as well as several billion dollars in various stablecoins. Unfortunately for the hacker, stablecoin operators rapidly intervened and froze the stolen assets, making them essentially unmovable and rendering half the attack futile. Nevertheless, if the amounts in question are confirmed, the hack will be the largest in history by a huge margin. The fact that Binance can supposedly absorb the blow with no loss of funds on behalf of its user base speaks volumes of the sheer size of the financial moat that the exchange has established. The CEO of crypto market maker Wintermute even claimed that ‘Binance has enough to withstand 3-4x of current hit and still be largely intact’.
Despite reassurances, the resulting price action has not been pretty. Bitcoin tumbled from $81,000 before the attack to lows of $76,000 in the following hours, while the wider crypto sphere suffered much of the same fate. All things considered, the damage was relatively limited, with most cryptocurrencies undergoing no more than a 10% drop before rebounding, which says a lot about the newfound resilience in crypto markets.
For many of the big tech companies, earnings season is not going according to plan. Alphabet (GOOG) missed expectations by a country mile on Wednesday, falling well behind on advertising revenue and reporting a massive cash burn of $9 billion in the third quarter. Alphabet shares plummeted over 12% during the following market session, erasing half a trillion dollars in market value. A day later, Amazon (AMZN) found itself in a very similar position, falling short on revenue and earnings per share and revealing astronomical capital expenditures of $220 billion, which will primarily be funnelled into AI data centres. Shares fell up to 8-9% in after-hours trading, setting the stage for a brutal opening on Wall Street later today. Intel (INTC) is in the same position, but to an even worse extent, collapsing over 20% in extended trading after publishing awful forward outlook. The poor sentiment continued to spread further out, affecting chipmakers and software companies alike.
Investors are worried because the core business models that have kept the likes of Google and Amazon afloat over the years are weakening, while these companies aggressively pivot to AI ventures that are costing absurd amounts of money. Whether the gambit pays off or not remains to be seen, but for now, many market participants are not impressed. The technology sector may be going through a rough phase, as evidenced by a 1.4% drop in the Nasdaq-100 yesterday, but the broader US stock market appears to be in a much healthier state. The S&P 500 and Dow Jones lost a comparatively modest 0.3% on Thursday, while the small cap Russell 2000 rose a solid 1%. Silicon Valley may be on the ropes, but many companies in the wider economy are showing robust earnings and growth, prompting a healthy rotation away from the usual market drivers. By the same token, US third quarter GDP figures came in higher than expected yesterday, highlighting a 3.4% annualised growth rate.
About the Author
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
Reviewed by RADEX MARKETS
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Description Binance suffered the largest cryptocurrency hack in history late on Thursday, draining $6 billion worth of user funds, half of which have now been frozen.
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