Crypto Rally Stalls as Bybit Hack and Stock Market Downturn Weigh on Sentiment

A promising uptrend in crypto markets was abruptly cut short on Friday after a massive security breach at Bybit and a sharp sell-off in U.S. equities, triggering widespread losses across digital assets.

Just hours earlier, the crypto market was rallying on news that the U.S. Securities and Exchange Commission (SEC) planned to dismiss its lawsuit against Coinbase (COIN). The development fueled optimism, pushing COIN shares up 5% and Robinhood (HOOD) up 4%. Bitcoin (BTC) also surged, briefly approaching the key $100,000 level.

Bybit Breach Sparks Panic

However, the bullish momentum was derailed when reports surfaced of a staggering $1.5 billion hack at crypto exchange Bybit—the largest security incident in crypto history. Blockchain investigator ZachXBT flagged suspicious activity, and Bybit CEO Ben Zhou later confirmed the breach. The revelation sent BTC and ether (ETH) tumbling nearly 2% within minutes as traders reacted to the uncertainty.

U.S. Stocks Extend Declines, Adding Pressure on Crypto

Hopes for a quick crypto recovery faded as the broader financial markets turned risk-averse. U.S. stock indices saw accelerating losses in afternoon trading, weighed down by disappointing economic data.

The Michigan Consumer Sentiment Index unexpectedly dropped to 64.7, missing forecasts of 67.8, while inflation expectations within the survey ticked up to 3.5%, above the expected 3.3%. Additionally, emerging reports of a new coronavirus variant, HKU5-CoV-2—described as “strikingly similar” to the virus behind the 2020 pandemic—added another layer of uncertainty to markets.

By market close, the Nasdaq had slumped 2.2%, the S&P 500 was down 1.7%, and the 10-year U.S. Treasury yield had fallen to 4.42%.

Bitcoin Drops Below $95K, Broader Crypto Market Slides

The risk-off sentiment spilled over into digital assets, dragging Bitcoin back below $95,000—down nearly 4% in 24 hours. Ether followed suit, slipping to $2,650, while the broader CoinDesk 20 Index declined 4.4%.

What started as a bullish day for crypto quickly turned sour, highlighting the market’s vulnerability to both security risks within the industry and macroeconomic headwinds.