Another $450m Crypto Hack??

Another $450m Crypto Hack??
Photo by Eric Welch / Unsplash

Another interesting morning in the world of  crypto. Luckily in this case it wasn't an actual hack but just a fear that tokens were stolen due to poor communication by the Optimism Team.

Date: 18th August 2022

Time: 05:12 AM SGT

Chain checkers noticed that that $450,000,000 worth of $OP Tokens were sent from one wallet to various different wallets without notice from the team. This went unnoticed for almost 4 hours before people started talking about it on Twitter and Discord servers.

As you can see from the chart below, the market reacted quickly and people shorted the token causing a 7.8% crash in just 6 minutes. Afterall, $450m was almost double the market cap of the $OP Token.

05:14 SGT:

As someone constantly online, I noticed the supposed 'hack' at the 2nd red candle. So not that early but not that late either for a short attempt (in hindsight of course).

So obviously I had to check the chain to verify that there was unusual movement of $450m worth of tokens and quickly try to figure out what was going on. If these tokens were immediately sold on-chain, I would know that these were definitely stolen and I can profit from the information asymmetry I have from other market participants due to just checking the transactions, transaction history and thinking probabilistically of what might be happening and what decision I need to make.

05:17 SGT:

While I was checking the chain, 0xSisyphus (one of the industry's best) reported his findings on-chain very quickly and summarised his findings.

Note how he gives a probabality. You can read cobie's post for more details about this sort of thinking.

Anyways, as I had also seen the 0.5 OP transactions and had trust in an anon character on CT, figured he was right and knew it was time to go long.

0xSisyphus' tweet marked the exact pico bottom of $OP and shorts started panic closing and longs longed and the price went up 7.6%.  Although the price needed to increase by 9% from the bottom to fully revert the fear mongering that was caused by the $450m transfer of tokens, you should probably not be trying to squeeze every penny and efficiency.

Other market participants who also bought the bottom when they figured out it was a hack are happy enough with a 7.6% gain out of the potential 9% was the market was efficient.

Also you have to account for the risk that there's a 1% chance this was a hack as the optimism protocol official team has not made a public statement at that point in time.

Therefore, one thing about price movements caused by these types of events is that you should ALWAYS as other market participants are closing. If you don't, it's like waiting at a red traffic light when every other car is speeding. You are going to get crushed in the process.

In the chart below, you can clearly see that from 5:36 onwards there is a trader absorbing the buy pressure with their ask limits.

Anyways, an interesting morning indeed (as someone who may or may not have caught both the pico bottom and local top 17 minutes later).