The cryptocurrency market has slipped by 0.88% over the last 24 hours, settling at a total valuation of $2.31 trillion. This decline is not occurring in isolation but mirrors broader financial trends, evidenced by a striking 90% correlation with the S&P 500 via the QQQ ETF, suggesting a macro-driven movement. However, specific crypto-native issues are amplifying the downturn, primarily stemming from a significant security breach and sustained institutional outflows. The primary catalyst for this risk-off reaction is a major exchange hack that has eroded confidence across the sector, while sustained ETF outflows and technical weakness continue to reinforce the downtrend.
At the heart of the sell-off is a major security incident involving the Lazarus Group, which reportedly laundered approximately $1.5 billion in Ethereum stolen from the Bybit exchange. This high-profile hack has severely eroded investor confidence, triggering a market-wide risk-off reaction. Historically, such breaches force investors to reassess counterparty risk and liquidity fears, leading to immediate sell-offs as trust in exchange safety diminishes. The market reacted swiftly to the news, interpreting the event as a direct undermining of exchange safety that amplifies existing fear among participants.
Compounding the fear generated by the hack is the retreat of institutional capital. Bitcoin and Ethereum ETFs have experienced significant outflows, with net exits from Bitcoin funds reaching $315.9 million in the week ending February 20. From a technical perspective, the market structure favors sellers, as the total market cap has fallen below all major moving averages, including the 30-day SMA at $2.5 trillion. Additionally, the Relative Strength Index sits at 41.1, indicating persistent bearish momentum. This combination means institutional capital is removing a key support pillar while the chart structure continues to favor sellers.
Looking ahead, the near-term trajectory depends on whether the fallout from the hack can be contained and if ETF outflows subside. The market is currently testing critical support near the $2.17 trillion yearly low. While the Fear and Greed Index has plummeted to 14, signaling extreme fear that often precedes a bounce, conviction remains low. A stabilization here requires a reversal in daily ETF net flows and a successful defense of the $2.17 trillion level. Conversely, a break below this support could signal a deeper correction, potentially testing further Fibonacci levels. Investors are now watching closely to see if buyers will step in to defend the yearly low or if this breach signals the start of a deeper liquidity crisis.
Ultimately, the market is under significant bearish pressure due to the combined weight of the security incident and persistent institutional selling. Although extreme sentiment readings suggest a relief rally could be imminent, the path forward hinges on stabilizing capital flows. The immediate trigger remains the hack, but the long-term path will be dictated by ETF flow data and the market’s ability to hold key support levels. Until these factors resolve, the crypto market remains vulnerable to continued volatility and macro-driven moves.