FTX hacker sells stockpiles of ETH: Crypto capitulation coming soon?
The crypto markets continue to bleed out this week following the collapse of the world's second-largest exchange, FTX, which filed for Chapter 11 bankruptcy on 11 November.
FTX was "hacked" the following day, and over 200,000 Ethereum were drained from the platform, raising suspicions and amplifying concerns.
The wallet holding the stockpiles of stolen cryptos gained "whale status" and was catapulted into the list of largest Ethereum holders, ranking in the top 50 ahead of some exchanges, large corporations and Ethereum developers.
The FTX exploiter, who has been dumping all other drained assets for ETH, is now one of the largest holders in the world, with 228,523 ETH ($284.82m) currently in their wallet.
Everyone should keep an extremely close eye on what happens next... pic.twitter.com/SAP3UkyVaa
— Dylan LeClair 🟠 (@DylanLeClair_) November 15, 2022
It is yet to be confirmed who was responsible for the hack and how they managed to withdraw the assets. However, the ETH wallet worth over US$250 million has become active over the last 24 hours.
The hacker began selling large batches of up to US$15 million ETH via decentralised exchange (DEX), 1Inch. The coins were first converted to wrapped Bitcoin tokens, including wBTC and renBTC. The reason for this is unknown; however, it may be to obfuscate the transactions in an attempt to launder the funds.
Update: FTX Hacker is now actively dumping ETH on-chain
He has dumped about $15 million ETH in the past 30 minutes and just prepped a fresh batch of $12 million
Still has $270m ETH in main wallet
He's selling ETH to wBTC to renBTC through aggregators like 1inch https://t.co/mEd8UHFCO0
— kamikaz ΞTH 🦇🔊 (@kamikaz_ETH) November 20, 2022
As expected, the market has not responded positively to the selloff, with Ethereum performing particularly poorly. Since the FTX collapse, ETH has broken down its US$1,500 support zone, falling close to 30% in the last 2 weeks.
ETH is trading at about US$1,100 and has formed a double bottom at this support zone. If this support level is compromised, the next major zone sits at US$850, and a drop of 20% could not be discounted.
Ethereum, the second largest crypto by market cap, acts as a beacon for the rest of the market, along with Bitcoin. Its fall in price and the increasing concerns regarding the possible selloff of hundreds of thousands of coins have led to many major altcoins also falling victim to double-digit losses.
If the selloff of stolen funds continues, panic selling may follow. Traders are sceptical and fearful about the market's current state, their assets' safety and, indeed, the future of the crypto industry.
This has undoubtedly been the worst fortnight in the history of crypto. However, the market has shown resilience in the past and recovered from losses of significant magnitude several times before.
An important consideration is that the collapse of FTX and the stolen funds were due to centralised failures and human error. DeFi exchanges remain unaffected and are operating as usual.
Rebuilding a layer of trust is a must if the crypto space is to come through the other side more robust, and the progression of DeFi and Web3 will play an essential role in the rebuild process.
Disclosure: The author owns a range of cryptocurrencies at the time of writing.