The $1.4B Bybit hack has shaken institutional trust in crypto staking, accelerating a shift from centralized exchanges to non-custodial solutions.
Bybit Hack Disrupts Institutional Staking Adoption
The Bybit hack, the largest crypto exchange breach to date, has raised concerns over the security of institutional staking, according to Everstake COO Bohdan Opryshko.
He warned that large-scale cybersecurity breaches discourage institutions from investing in staking products, especially for Ethereum (ETH).
Institutional Investors Hesitate on Staking ETFs
Opryshko noted that legal and compliance teams may freeze plans to allocate funds to ETH staking products following the hack.
“When an auditor or a potential institutional investor evaluates, for instance, an ETH ETF and sees a billion-dollar hack, their legal and compliance teams are likely to freeze any plans to allocate funds into such assets,” he said.
Stakers Move Away from Centralized Exchanges
The Bybit incident has intensified an ongoing trend of stakers withdrawing funds from centralized exchanges (CEXs).
In the past six months, staked ETH on CEXs fell by 7%, with a 0.5% drop immediately after the hack, suggesting a shift to non-custodial staking solutions and hardware wallets.
Regulatory Outlook for ETH Staking ETFs
While Ether ETFs in the U.S. do not currently allow staking, the SEC has acknowledged issuer requests to introduce staking components, similar to those already permitted in Europe.
As of Feb. 27, Ether ETFs have seen nearly $3B in inflows, though they still lag behind Bitcoin ETFs, which have drawn over $37B.
Future of Crypto Staking Post-Hack
The hack has raised questions about staking risks, including slashing penalties if validators act improperly. With Solana and other networks also relying on staking, the industry faces increasing pressure to enhance security and regain investor confidence.
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