The '$2 Billion' Hack That Rewrote Cryptocurrency History...What's Next for Ethereum

The rollback controversy surrounding Ethereum (ETH) continues as the United States identifies North Korea as the perpetrator behind the 'Bybit hack.' As major cryptocurrencies like Bitcoin (BTC) continue their downward trend, all eyes are on Ethereum's price direction.

The Federal Bureau of Investigation (FBI) issued an official statement on the 26th (local time), stating that "North Korea stole a large amount of cryptocurrency through the Bybit hack." Global cryptocurrency exchange Bybit lost approximately $1.46 billion (about 2.1 trillion won) worth of cryptocurrency in a hack on the 21st of this month. Most of the stolen assets are reportedly Ethereum.

The hack is believed to have been orchestrated by Lazarus, a hacking group under North Korea's Reconnaissance General Bureau. Lazarus gained notoriety through the 2014 Sony Pictures hack and the 2016 Bangladesh Central Bank hack. This incident surpasses the 2014 Mt. Gox ($470 million) and 2021 Poly Network ($611 million) incidents, making it the largest cryptocurrency hack in history. The British newspaper The Independent described the Bybit hack as "the largest robbery in history" in terms of the amount stolen.

"A rollback would cause massive disruption"

The Bybit hack has sparked debate about an Ethereum rollback. A rollback is the process of reverting blockchain network data to a point before a specific event. Some in the industry argue that a rollback is necessary since the 2 trillion won worth of Ethereum stolen by North Korea could likely be used for illegal funding, such as nuclear weapons development. Ethereum has previously executed a rollback in 2016 following 'The DAO' hack. Samson Mow, CEO of Jan3, stated, "I fully support an Ethereum rollback to prevent the North Korean government from using the (hacked) funds for nuclear weapons development."

However, negative views on rollbacks prevail in the industry. The main concern is that rolling back Ethereum could undermine the principle of decentralization. Critics also point out that the situation differs significantly from 2016, as Ethereum's position has been elevated to that of a global asset following the U.S. approval of Ethereum spot ETFs last year. Tim Beiko, an Ethereum core developer, stated that a rollback is "technically impossible" and would "cause massive disruption across DeFi and bridges."

The key factor is the U.S. authorities' response. Since the FBI has already identified North Korea as the perpetrator of the Bybit hack, some analysts suggest that if Ethereum doesn't implement a rollback, it could be interpreted as enabling illegal funds that may be used for weapons development. The U.S. Office of Foreign Assets Control (OFAC) continues to add organizations involved with North Korean hackers to its sanctions list. Some argue that refusing a rollback could potentially conflict with UN Security Council resolutions prohibiting North Korea's possession of nuclear weapons.

Bearish outlook in the short term

Given these circumstances, some predict that the rollback controversy won't subside easily. An industry insider said, "The possibility of an Ethereum rollback exists," adding that "(the rollback controversy) could intensify the conflict between cryptocurrency regulations and the principle of decentralization." They added, "If a rollback occurs, it would be a significant turning point for Ethereum's role as the altcoin leader."

Ethereum's price direction is also drawing attention. The market consensus is that Ethereum prices will continue to decline in the short term, as the Bybit hack coincides with the overall weakness in the cryptocurrency market. As of today, the world's largest betting site, Polymarket, shows only a 1% probability that Ethereum's price will exceed $2,800 this month. Just a week ago, this probability was over 30%.

The probability of Ethereum reaching a new all-time high by next month is also just 3%. On-chain analysis platform Spot On Chain stated, "February has historically been a bullish period for Ethereum," but added that "(however) this year is likely to be an exception."