Hacks trigger a cascade of problems for altcoins

When a crypto project with its own native token is hacked, it often marks only the beginning of deepening financial troubles, as the token's price typically continues to decline for months after the attack, new research has found.

Immunefi, an on-chain crowdsourced security platform, has analyzed 176 hacks between 2021 and 2023, examining how the tokens of the affected protocols performed up to six months after the breach.

The data shows that the market impact of a hack persists and even intensifies over time. While the median price drop is around 10% two days after the hack, it exceeds 50% after six months.

Some tokens crash by 100% in the days following the incident, while others experience a 100% decline even after six months.

Some tokens managed to partially recover within a few months. For example, among the tokens examined, BNB, the native token of the largest crypto exchange, Binance, showed a more notable rebound. The price rose 20% one month after the BNB Chain hack, though it was still down 12% three months after the incident. In contrast, many other tokens failed to recover even after three months.

According to Immunefi, hacks affect crypto projects in many ways that may be even more financially damaging than the hack itself, though these losses can be difficult to quantify.

Hacked projects face ongoing market impact, as the value of their tokens continues to decline for an extended period, making it more difficult for them to finance operations. Additionally, Immunefi notes "dependency impacts," referring to second-order effects. For instance, a blockchain hack can compromise all other projects built on that chain.

Teams are also forced to spend their human and financial resources on post-hack recovery rather than growth, which could prove fatal for the project.

According to Immunefi's data, over $572 million has already been lost in the crypto space in 2024 due to hacks, compared to $1.8 billion in all of 2023.