Binance Withdrawals Slow After $6.3 Billion Crypto Heist

Binance said client withdrawals were beginning to normalise after hackers drained $6.3 billion from the world’s biggest cryptocurrency exchange in what could be the biggest financial heist on record. Binance partially restored withdrawals after the incident and customers withdrew a net $3.64 billion from the site during nine and a half hours on Sunday 1 November. 

The outflow equalled 2.1% of its assets, the exchange said, and analysts suggested the volume of withdrawals was surprisingly moderate given the extent of the heist. The data show that Binance has so far averted a mass withdrawal of customer assets, but the incident has generated further concerns about cryptocurrency security. 

Larger investors are also anticipated to be more cautious while authorities try to figure out how the incident occurred and Binance continues to bring back its services.

Binance Says Customer Withdrawals Are Stabilising

On Sunday, almost $4.6 billion was withdrawn and $1 billion was deposited at Binance, just after clients were allowed to access part of their accounts again. The exchange stated withdrawal activity had dropped after an initial rush, and customers continued to deposit money even after the security problem. 

"Withdrawal volumes have declined and are stabilising after an initial spike," Binance said in a statement made on X. The exchange, which claims to have more than 335 million customers worldwide and which processes an average daily trading volume of $95 billion, has been trying to return to normal operations since the attack on Thursday night. 

Binance commenced a phased restoration of withdrawals on Sunday, first enabling customers to move bitcoin on the Bitcoin network and ether and select dollar-backed stablecoins on the Ethereum network. Withdrawals for numerous other cryptocurrencies remained partially suspended as the exchange carried out extra security checks. 

Binance co-CEO Yi He said its immediate focus was on securing the platform before customers could withdraw their funds and full operations could resume. “Our top priority right now is to ensure the environment is secure, after which users can withdraw their funds and Binance can resume operations,” He wrote on X Monday. 

Even with the limits, some clients have chosen to leave their funds on the exchange rather than remove them immediately. Centralised exchanges are still vital for cryptocurrency trading because they give liquidity and access to markets, Jay Koh, vice president of the Singapore-based Asia Web3 AI Association, told Reuters. 

Another Binance customer, Ryan Tan, said he wasn't in any rush to take out what was left of his money. The 39-year-old said he'd already cut back on how much he stored on exchanges after the collapse of FTX in 2022, choosing to store most of his cryptocurrencies in a personal wallet instead.

Binance Moves to Cover Customer Losses

Binance said it'll use its corporate treasury, insurance reserves and funds earmarked for security issues to cover the losses from the hack. The company stated it has already raised $6 billion to replace the lost assets. In a separate recovery update issued Sunday, Binance said it had replaced some 95% of the affected assets, and that the remaining balance was made up of less liquid cryptocurrencies that were taking longer to replace. 

Those assets were replaced, but the stolen funds still haven't been recovered. Investigators and blockchain security firms are still monitoring the stolen cryptocurrency, and Binance is using its own resources to restore the funds that back customer holdings. The FBI on Saturday blamed North Korean hackers for the attack, identifying it as the work of a state-sponsored group called TraderTraitor. 

The group has already been tied to cryptocurrency thefts used to generate funds for North Korea. The full details of the breach are being investigated. Binance has said it discovered no evidence its wallet private keys were leaked and is continuing to examine how the attackers accessed its systems. Some of the stolen funds have already been frozen. 

About half of the stolen assets were stablecoins, cryptocurrencies designed to maintain a stable value against traditional currencies such as the US dollar. Circle, the company behind the USDC stablecoin, said Monday it had frozen more than $1.1 billion in USDC linked to the crime. 

But the rest of the funds may be hard to recover as the attackers shuffle assets across cryptocurrency wallets and networks.

Crypto Markets Recover as Institutional Investors Turn Cautious

Cryptocurrency prices began to recover after Friday’s steep fall, but analysts say the attack might have a longer-lasting effect on investor confidence. Bitcoin dropped to a six-week low on Friday but rebounded over the weekend to trade above $78,000 on Monday. Ether also bounced back after touching its lowest level in two months. 

The rebound came as analysts cited signals that bigger investors were cutting exposure to cryptocurrencies. Spot bitcoin exchange-traded funds experienced $643 million in outflows on Friday, while leveraged cryptocurrency positions saw more than $1.3 billion liquidated, said Ari Redbord, global head of policy at blockchain analytics company TRM Labs. 

ETFs allow investors to obtain exposure to bitcoin without actually owning the cryptocurrency. Withdrawals from these funds might thus serve as a measure of the reaction of institutional investors to market movements. "Those figures point to investors reducing risk," Redbord told Reuters. 

The attack on Binance didn't create widespread panic or a concentrated rush of withdrawals, said Tim Sun, a senior researcher at Hong Kong digital asset company HashKey Group. But he cautioned that security worries could impact how much money market makers, institutions and other investors are ready to put into cryptocurrencies. 

Binance faces the immediate problem of restoring full withdrawal services and convincing clients their assets are safe. The initial rush to withdraw funds seems to be abating, but the investigation is ongoing and the long-term impact on institutional confidence is unclear.