Wall Street Downplays Binance Hack as Bitwise Sees ‘Recovery In a Week’

Hougan Calls the Hack a Mere ‘Blip’

Hougan, chief investment officer at crypto asset manager Bitwise, played down the damage, stating:

This hack has not changed anything about the long-term direction of Bitcoin. I think in a week you’ll see price has recovered.

He made a similar point to Reuters, saying that “hot wallet hacks — even large ones — have historically not had a meaningful impact on future crypto returns.” Not only that, he believes investors typically treat such incidents as one-off events.

With this context in mind, it is visible that the selloff was real but limited, as bitcoin fell to a six-week low of $76,368 after the breach while ether dropped to a two-month low of $2,178.

At press time, bitcoin has since steadied near $77,000, with Hougan’s optimism being consistent with Bitwise’s view of bitcoin’s long-term path that has the asset reaching 1.6 million.

Comparisons to a Bank Robbery Emerge

Brokerage analysts lined up behind the buy-the-dip case, and TD Cowen’s Lance Vitanza argued the hack exposed weaknesses in Binance’s security, not in bitcoin’s technology, writing:

We do not stop using dollars when a bank is robbed, just as car theft does not invalidate the automobile.

Cantor Fitzgerald’s Ramsey El-Assal was just as direct. “We would be buyers on weakness,” he wrote, adding, “overall, this is painful, but it is not 2022.” Lastly, Compass Point analysts Ed Engel and Michael Donovan said, “We believe Binance has more than enough liquidity to cover the hole.”

Crypto stocks took the brunt of the panic, with Coinbase and Strategy each falling about 12% on Friday, while Robinhood dropped about 9%.

The Network Was Never Breached

Securitize CEO Carlos Domingo also commented on the brewing situation, stating:

The network itself was not hacked. The hack happened in the centralized entity that sits on top of it, the same way many traditional finance companies have been hacked.

Similarly, investor Scott Melker pointed to Friday’s tech rout for perspective and highlighted that Alphabet fell 12.6% while Intel too dropped sharply, adding:

Considering that Binance was hacked, the world’s largest exchange, for over $6 billion, and we have a massive tech selloff, Bitcoin being down 4% or 5% at any given moment in this story, pretty good.

Not everyone was as relaxed, though, and Tim Sun of Hashkey Group told Reuters that the breach “may further dampen risk appetite and prompt investors to reassess the safety of assets held on centralized exchanges.”

What Could Prove Hougan Right

The next catalysts will come from Binance itself, as the exchange is targeting a restart of customer withdrawals (in phases) shortly while also promising its proof-of-reserves results by Nov. 2. A clean reopening could give bulls the confirmation Hougan expects. Interesting few days ahead!

Binance is preparing to restore withdrawals in phases after its $6.3 billion hack, with reopening dependent on security checks. The…