Market panic liquidated more than $1.3 billion in leveraged long positions in just five hours after Binance’s multi-billion-dollar hack came to light. Several data providers even recorded liquidations reaching $1.49 billion, as Bitcoin plunged near $77,000 and BNB fell by more than 8% within 24 hours.
Market sentiment immediately sank to a two-month low. The Bitcoin Fear and Greed Index dropped to 30 into the ‘fear’ category, its lowest level since August 14. A sell-off wave also hit the decentralized finance (DeFi) sector, with Uniswap (UNI) sliding 10.4% to $6.48 and Aave (AAVE) tumbling 11.3% to $118.54.
However, spot market pressure was only the beginning, as the movement of stolen assets quickly triggered emergency actions across various decentralized protocols.
$158 Million Funneled to Uniswap and Arbitrum’s Response
The hacker immediately offloaded stolen assets on decentralized exchanges such as Uniswap. The attacker swapped tokens that could be frozen by centralized issuers - including UNI, ENA, PEPE, LINK, AAVE, ONDO, and WLD worth a total of $158.25 million - into 70,480 ETH to avoid being blacklisted.
Precautionary measures came from the layer-2 network. The Arbitrum Security Council executed an emergency transaction to freeze approximately $30.5 million from the hacker’s address, comprising 74.6 million ARB tokens and 8,425 ETH.
Aave and Kamino Freeze Lending Markets
Monitoring fund movements and market volatility, lending protocol Aave temporarily froze new deposits and borrows across V3 and V4 markets on the Ethereum mainnet as a precautionary measure. Aave assured that the protocol’s core contracts remain secure and withdrawal facilities stay open for users.
On the Solana network, the Kamino protocol adopted a similar policy. Kamino administrators temporarily paused the SOL/BTC lending market to mitigate price volatility risks and systemic exposure.
Loss Estimates and Trading Counterparty Resilience
The scale of the breach produced two differing estimates. Binance updated the volume of verified and frozen stolen assets to $3.0 billion, up from an initial $2.54 billion. On the other hand, analytics firm Chainalysis estimated total losses reached $5.912 billion. To conduct a comprehensive security review, Binance temporarily suspended deposits and withdrawals, while reaffirming its commitment to cover all losses through its SAFU emergency fund.
Exposure to the funds also affected market-making firms. Wintermute confirmed having exposure of less than 20% of its net equity on Binance, while GSR reported exposure of under 5% of its net equity. Both companies confirmed that their trading operations remain stable.
For market participants and DeFi users, this incident demonstrates how disruptions at a centralized exchange can immediately restrict liquidity access across decentralized networks. While withdrawals on Aave remain open and SAFU funds are prepared, the shuttering of lending markets proves that when shocks strike, protocol-level risk protection often demands sacrificing transaction flexibility.
Via Cointelegraph.
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Previously: Binance Hot Wallet Drained of Up to $5.8B via EIP-7702 - Stablecoin Issuers Freeze $2.5B
Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
