It’s been a very trippy week in the world of cryptocurrency. With some tokens experiencing double-digit percentage drops in price, a leading centralized exchange getting hacked, and new regulatory actions shaking the scene in the United States, digital assets ranging from EOS to Near Protocol (NEAR) took a major beating. Simultaneously, crypto exchange Bybit spooled up considerable resources to recover from a colossal hack. At the same time, former US President Donald Trump moved to repeal a controversial rule from the IRS. This rule would have significantly increased reporting burdens for DeFi platforms.
Market Downturn and Token Performance
A few other cryptocurrencies dropped significantly during the last week. EOS, the token associated with the EOSIO blockchain platform, fell over 23%. This massive drop turned it into the worst-performing asset of over 6,000 assets in the top 100 cryptocurrencies.
The NEAR Protocol (NEAR) token was not spared either as it saw a drastic decline in price, plunging more than 19% on the week. These declines exemplify just how volatile the cryptocurrency market truly is. Individual tokens more frequently trend based on market sentiment and overall economic conditions.
Bybit's $1.4 Billion Hack and Recovery Efforts
This past Tuesday, February 21, one of the most audacious hacks to date rattled the crypto world. Bybit just announced losses exceeding $1.4 billion in liquid-staked Ether (stETH), Mantle Staked ETH (mETH), and other cryptocurrencies. This event was the most significant hack in the exchange’s history and sent shockwaves across the digital asset ecosystem.
The hack occurred amid what analysts described as a "broader trend of macro de-risking that began prior to the event," suggesting that external economic factors may have contributed to the vulnerability or timing of the attack.
Following the hack, Bybit experienced a loss of trading volume. Soon the exchange bounced back, opening again and demonstrating great calmness under pressure in its recovery. As per Block Scholes Market Recovery, Bybit has consistently recovered the lost market share.
Since this initial decline, Bybit has steadily regained market share as it works to repair sentiment and as volumes return to the exchange. - Block Scholes
Bybit’s proportional share jumped from a post-hack 4% low to approximately 7%. This new jump highlights its phenomenal comeback in the race for its market share. This rebound is a testament that Bybit’s ability to tackle security issues and bring back user confidence has worked, after being the target of a hack.
Security Enhancements and Market Share Rebound
Following the record hack, Bybit rolled out enhanced security protocols and greater liquidity provisions for everyday traders. We created these improvements so similar episodes don’t happen again. They promise users that their assets on-platform are safe.
On an aggregate basis, Bybit’s spot volume market share has staged a killer comeback. Among the top 20 centralized exchanges, it was even higher at 83%, bringing it back to pre-hack levels. Yet, competitive though, this recovery may be, it highlights the exchange’s capacity to lose that competitive advantage in the long term.
Trump Overturns IRS DeFi Broker Rule
In a big win for the decentralized finance (DeFi) sector, former US President Donald Trump intervened. He followed this up by reverting an IRS rule that sought to broaden reporting requirements to include DeFi platforms. The IRS DeFi broker rule, set to take effect in 2027, would have required DeFi platforms to disclose gross proceeds from crypto sales, including information regarding taxpayers involved in the transactions.
The now-overturned rule would have broadened the tax authority’s existing reporting requirements to cover DeFi platforms. This expansion would have mandated DeFi platforms to disclose gross proceeds from crypto sales and taxpayer information, raising concerns about privacy and the feasibility of implementing such requirements in the decentralized space.
The decision to overturn the IRS DeFi broker rule represents a major win for the cryptocurrency industry, particularly the DeFi sector. Trump’s move to remove the expanded reporting requirements provides some much-needed administrative relief to DeFi platforms. This move is a major win that eases the compliance burden massively on crypto users.
