Impact of Hacks on coin Value Lasts for Months, Study Shows
A recent report released by the major bug bounty and security services platform Immunefi sheds light on the long-lasting effects of hacks on the value of cryptocurrencies. According to the 'Hacks & token Prices Report 2024,' the market impact of a hack on a coin's value persists and even increases over time, with significant repercussions observed for at least six months following the incident.
Factors That Contribute to coin Value Damage
The report emphasizes that the commonly used metric of 'net value stolen' vastly underestimates the total damage caused by hacks. It points out that there are several other damaging factors resulting from hacks that are challenging to quantify but have a more significant financial impact than the hack itself. These include market impact, dependency impacts, and talent and organizational impact, which all contribute to the overall damage inflicted by a hack on a cryptocurrency's value.
Prolonged Influence of Hacks on token Prices
Immunefi's study delved into the market impact of hacks by analyzing 176 hacking incidents that took place between 2021 and 2023. The research focused on monitoring the performance of the hacked protocols' native tokens over different timelines, ranging from the day of the hack to six months after the event. The findings revealed a persistent decline in token prices following a hack, with significant drops observed in the immediate aftermath and continuing for several months.
The Ongoing Downward Spiral of coin Value Post-Hack
According to Mitchell Amador, Founder and CEO of Immunefi, a hack marks the beginning of financial damage rather than the end. He highlighted that the immediate losses resulting from a hack often lead to larger losses caused by market impact, dependency impact, and the significant amount of time spent rebuilding operations post-incident. The study further emphasized that token prices experience a substantial decline post-hack, extending the losses incurred due to the market impact of the attack.
Notable examples highlighted in the report include Euler Finance's EUL token, Mixin Network's XIN token, Venus Protocol's XVS token, and Ronin Network's RON token, all witnessing significant price declines in the days following security breaches. The study also noted that the recovery of token prices post-hack was limited, with only BNBChain's BNB token showing significant price recovery one month after the attack.
Conclusion
The 'Hacks & token Prices Report 2024' from Immunefi underscores the lasting impact that hacks can have on the value of cryptocurrencies, with repercussions extending for months following the incident. This study provides valuable insights into the complexities of assessing the full extent of damage caused by hacks and emphasizes the need for heightened security measures in the cryptocurrency space to mitigate the financial risks associated with security breaches.
