Why is CZ expecting limited Bitcoin downside from the $6.3B Binance hack?

Binance founder Changpeng Zhao (CZ) has echoed ongoing discussions that the $6.3B hack won’t negatively impact Bitcoin’s value. According to CZ, the Binance exploit’s exposure to BTC is relatively small, 18,270 BTC compared to Mt. Gox’s 650,000 BTC. 

That’s less than 1%, while Mt. Gox’s exploit involved 5% of the total BTC supply.

CZ added, 

Number of users impacted, and % of user assets impacted. Mt. Gox (the largest CEX at the time) and FTX (not small) were all near 100% of users and their assets.

Finally, CZ noted that whether the affected platform covers all the losses dictates the market sentiment. Binance has already reserved $6.34B to cover the losses and has begun buying some of the stolen assets to refund users. 

Will Binance hack confirm Bitcoin’s cycle bottom?

When news of the exploit was first reported on Thursday, Bitcoin dropped by 4% from $81.9K and closed at $77.9K. At the time of writing, the asset’s price hovered around $77.3K, down about 6% since the hack. 

According to Anthony Pompliano, the muted reaction to the largest hack in crypto history meant the market outlook was positive. 

One of the largest crypto exchanges gets hacked for $6 billion, and Bitcoin sold off less than 5%? Bullish.

Pompliano added that in the past, similar hacks triggered 20%-40% Bitcoin drawdowns. That’s not all either as he also drew some interesting parallels to FTX’s implosion, which marked 2022’s BTC cycle bottom around $16K.

He added, 

If you had purchased Bitcoin at the bottom, you would have seen your ~ $16,000 Bitcoin price turn into $125,000 over the next three years. The facts of this situation, and the muted price drawdown, tell me that investors should be gearing up for higher prices in 2027.

For his part, Ryan Watkins, founder of crypto VC firm Syncracy Capital, stated that the hack was the climax of the price pullback.

According to him, the incident helped reset and clear the remaining market froth (excess leverage). 

It’s possible we see more volatility over the coming weeks as the market digests the hack and rising macro uncertainty. This looks like the necessary reset I was looking for in what I believe is an early bull market.

Bitcoin’s Open Interest (OI), which tracks derivatives demand, leverage, and market froth, also dropped to $24B, from a recent peak of $27B when BTC’s price hit $87K. 

The cryptocurrency is now down 12% from its September high, but is yet to break below the 200-day MA ($73K) and the 50-week MA( $75.75K).

In other words, the early bull market cycle setup may still be intact. However, breaking below the two moving averages ($75K/$73K) would flip BTC back to bear market territory. 

Final Summary

• CZ claimed BTC has seen a muted price drawdown because Binance will cover all losses tied to the $6.3B hack.
• The incident offered a needed reset in market leverage, but cracking below $73K would invalidate the early bull market cycle setup