Bitcoin Rebounds, But Crypto’s Security Crisis Intensifies – Week in Review

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This editorial is from last week’s edition of the newsletter Week in Review. Subscribe to the newsletter to get this weekly editorial the second it’s finished. The newsletter also includes the biggest stories of the week with a comment on each story. Key Takeaways: - Bitcoin rose 4% as BTC, ETH, and SOL gained, showing risk appetite despite oil and macro stress. - Kraken, CoW Swap, and Hyperbridge hacks hit trust; Ethereum Foundation launched audit support next. - Bitfinex said whale buying is the strongest since 2013; Bitcoin may test $90K as supply tightens. Week in Review Bitcoin finished the week up over 4%, ethereum up 6%, and solana up 7%. This seems great if you avoid remembering that both the S&P 500 and the Nasdaq broke new all-time highs yet again, despite the extreme uncertainty. Gold printed a modest green weekly candle while silver traded slightly down on the week. BTC’s rebound, combined with the indices’ unlikely break, suggests a return of fresh risk appetite. Kevin Warsh, the presumptive next Fed Chair, disclosed ownership across more than 30 crypto projects, which crypto market participants, desperate for any positive news, interpreted as bullish for the sector’s policy future. Jeremy Allaire also sounded notably bullish on Jakarta’s future, a reminder that crypto’s next growth story may come less from New York and more from cities where digital finance is being treated as infrastructure rather than ideology. The flow of oil out of the Middle East remains blocked. A University of Chicago professor went viral warning of critical shortages within ten days. Despite positive price movements, unresolved geopolitical conflict, and an ongoing oil shortage, the biggest theme of the week in crypto was security, and the ongoing threat of hacks and exploits against digital assets. Solana’s multisig application Squads suffered a multisig incident. CoW Swap had a DNS hijacking that compromised the frontend, although the backend remained safe. Then came another incident. An exploiter allegedly hit a vulnerability in Hyperbridge, minted a billion DOT, and dumped it for ETH. This illustrates the costs of mistakes in crypto: when infrastructure breaks, the consequences can be immediate, absurd in scale, and brutally extractive. Meanwhile, Kraken, one of the biggest and most regulated crypto exchanges in the world, is reportedly facing criminal extortion and believes criminal groups are trying to penetrate not just its organization, but other tech companies as well. And over all of it hovered the sobering reality of the AI security apocalypse. That’s not an attempt at melodrama. AI may be lowering the cost of attack faster than the industry can raise the quality of defense. The industry is starting to sound like it knows it has a problem. Drift’s restitution steps were one of the clearest examples: a major protocol trying to make users whole after a hack, while also signaling that trust now has to be actively rebuilt, not assumed. Elsewhere, the Ethereum Foundation launched an audit subsidy for founders who need security reviews. Making security a priority is coming slowly, though. @santiagoroel said on the Empire podcast that AI-driven hacks have made DeFi “uninteresting” now. That might actually be understated. And yet, even with all of this, or perhaps because of this, Bitcoin is building a bullish case. Bitfinex says whales are on their biggest buying spree since 2013, while exchange reserves have dropped to a 2017 low. Strong hands accumulating while liquid supply on exchanges keeps thinning out is typically a long-term bull’s dream. @TimDraper piled on with his $250K call, arguing Bitcoin can clear that level within eighteen months. @McClellanOsc added another bullish data point, saying smart money positioning in futures suggests that Bitcoin has already formed its bottom. CryptoQuant CEO Ki Young Ju offered another framing, suggesting Michael Saylor’s cost basis may be becoming the benchmark value zone for BTC. As for a relief rally, @zerohedge claims Bitcoin is in the middle of retesting $90K after finally breaking its diagonal resistance. Bitmine’s growing dominance in ETH continued to hog center stage. The company says it now owns over 4% of supply and is closing in on its “Alchemy of 5%” target. Following the alleged rug in Bittensor’s subnet 3 (SN3), TAO had another down week, while @AlgodTrading is no longer as optimistic as he was before. Not all risk appetite disappeared. It just showed up in more degenerate places. A random shitcoin called RaveDAO (RAVE) is up 6113.5% in the last month and has climbed to the 26th-largest coin by market cap. That is the sort of thing that makes the whole market look both alive and mentally ill at the same time. ZaxhXBT essentially labeled the project a scam. Meanwhile, Arkham reported that an anonymous person on CT with 5,000 followers made $30 million shorting shitcoins. Signs of life in the NFT space are yet to be found. Steve Aoki sold NFTs he bought for $800,000 for just $13.8K total. One of the more important background stories this week is that crypto investors stopped writing checks. In 2022, 5,345 unique investor names appeared in deals, but in the last 90 days, that number shrank to 377. That stat should matter more than it probably will in the moment. A market can rally while venture appetite dries up. In fact, that combination often tells you something useful: liquid names may still run, but the willingness to finance new risk is fading. That is usually a sign that investors are becoming more selective, more skeptical, or both. That also helps explain why hacks feel especially toxic right now. Security failure is no longer happening in an environment of abundant patience and endless capital. It is happening in an environment where trust is already scarce. This was also a week where macro kept pushing its way into the crypto frame. These stories may feel disconnected, but they are not. They all point to the same world: one where political transition, supply strain, regional adoption, and monetary risk are blending together. Crypto no longer lives outside that world. It is one of the clearest mirrors of it. -Alex Richardson

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