Ethereum faces 420K ETH supply overhang, yet bulls remain hopeful – Why?

 The market is now digesting the post-hack developments. 

The on-chain data looks promising so far. Binance has frozen funds, there are investigations underway, and exchange reserves indicate limited market impact. Meanwhile, high cap assets such as Ethereum have only fallen by just over 3% this week, indicating relatively contained selling pressure. 

However, what happens next to the $6.3 billion in stolen funds could be the bigger story. One analyst noted that the Binance hacker may have found a clever workaround. Tether had frozen $1.5 billion in USDT, followed by Circle freezing another $800 million in USDC. But the attacker allegedly deposited the stolen USDT into Aave as collateral and borrowed Ethereum against it. 

Why does this matter? While Tether can freeze any USDT held as collateral, it cannot directly freeze the ETH that has already been borrowed from Aave. This means the attacker will have free access to their liquid ETH whilst the collateralized assets remain stuck in the protocol, making it harder to recover. 

The scale is worth noting too. The Lazarus Group is reported to hold over 420,000 ETH that can’t be frozen. From a market perspective, this creates a potential supply overhang, with such a large Ethereum [ETH] position posing a risk of additional selling pressure. 

However, market reaction so far suggests otherwise.

420k Ethereum in focus as dip buyers eye a market reversal

Ethereum remains at the center of the ongoing FUD surrounding the Binance hack.

On the bearish side, an analyst noted that low order book liquidity and 5x wider bid-ask spreads could make ETH vulnerable to spot-selling pressure through November and December. The result? Ethereum may continue to lag Bitcoin until some of the selling pressure begins to ease, possibly into early 2027.

On the other hand, some analysts see this “dip” as a great time to buy back into Ethereum. The reason being that Binance has pledged to cover all the losses using its SAFU fund and company funds. However, with the SAFU fund containing around $1.15 billion in BTC, covering less than 35% of the estimated losses, Binance would need to absorb the remaining $2.2 billion.

The key takeaway? Binance appears to have the financial capacity to manage the hit.

This may naturally cause a shift in the way that the market views the 420k ETH associated with the attacker. To compound matters further, Ethereum’s RSI is now in oversold territory for the first time since June, potentially creating an attractive entry point for dip buyers. 

As a result, this bullish setup could actually be a net positive for the market with the 420k ETH overhang being digested by Binance. This could spark a new accumulation phase that will help make Ethereum an important recovery catalyst.

Final Summary