Hacks, Forks, and Hash Rate
Not-So-Private Keys
This week started with a pair of high-profile exploits – the first of which came in the form of a bridge hack, as interoperable bridging protocol Nomad was hacked for $200 million. Ironically, the vulnerability appeared to stem from a known bug highlighted in a previous audit. Despite this, the Nomad hack furthered widespread skepticism surrounding multichain bridge security.
To seemingly one-up Monday’s hacker, an entity on Tuesday began a smaller but arguably more sinister hack that manifested in funds being drained from individual “non-custodial” hot wallets native to the Solana network. This was a confounding exploit as the hack targeted individual users, not a protocol or treasury. It appeared on chain as though users were signing their transactions, thus validating transfers to the malicious actor.
The apparent novelty of this hack initially caused widespread panic since many reasonably believed this to be an issue specific to the Solana blockchain, potentially rendering all funds secured on Solana to be compromised. The uniqueness of the situation also resulted in an extended diagnosis period for the issue. While exploits are typically diagnosed minutes following their public reveal, this issue required more time for developers and con...Reports you haven't read
BREAKING AWAY While we maintain that macro conditions are still the most critical factor in assessing the medium/long-term trajectory of BTC prices, daily returns of the leading cryptoasset continue to exhibit a lack of defined correlation with any major macro asset. To us, the biggest reason for this sustained lack of correlation is the advent of the spot BTC ETF. A prime example of how ETFs are influencing BTC's performance...
WEATHERING THE STORM Heading into Q1, the key risks identified were: (1) A potential QRA supply shock, as long-term interest rates could surge due to a possible shift in bond issuance towards longer-duration securities, (2) the repricing of interest rate cuts, as the Federal Reserve downplayed expectations regarding the timing and frequency of such cuts, and (3) concerns regarding the dynamics between the expiration of the Reverse Repurchase Agreement (RRP)...
QRA IN LINE WITH MARKET EXPECTATIONS _THE RESULTS_ The Treasury’s quarterly refunding announcement (QRA) was the first of two major macro events to transpire on Wednesday. Leading up to this, on Monday, there was an indication that the net borrowing for the current quarter would be $760 billion, which is $55 billion lower than the initial $815 billion estimate, and the total funding needs for Q2 would be just over...
THE GBTC PROBLEM We have been watching spot BTC ETF flows closely since their launch two weeks ago, and while overall net flows remain decidedly positive, the market seems hung up on GBTC outflows. As a reminder, the outflows we care the most about are those from entities that are not rotating into other spot BTC ETFs. This is comprised of some speculative capital that played the run-up into ETF...
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