Risk Insights
February has been a tumultuous month in crypto. Bitcoin saw a sharp drop amid volatile market conditions, sliding from roughly $100,000 at the start of the month to $80,000 by the end. This downturn was mostly driven by macroeconomic headwinds – persistently high inflation, a deteriorating interest-rate outlook, and renewed trade-war fears.
Beyond these macroeconomic uncertainties, the threat of hacks was also in the foreground this month. Just one month after the Phemex hack, the biggest crypto heist ever occurred on Feb 21 when North Korean hackers stole $1.5 billion from Bybit. This was detected by Agio Ratings’ on-chain monitoring within minutes and the resultant outflows reduced Bybit's on-chain assets by around 35%.
Such hacks are an alarming reminder of the security risks counterparties face in a trading environment that still lacks any facility to reverse payments. Agio Ratings’ analysis shows that significant hacks occur in 2% of counterparties each year and that these hacks have a "black swan" distribution; they tend to be small, but occasionally they are massive. Under these circumstances, it's crucial to identify and react when your counterparty has been hacked as soon as possible and importantly before the rest of the market.
As a result of these events, 47 out of 48 entity default risks deteriorated in February. Bitpanda’s higher user activity made it the single exception. The average 1-year PD across exchanges rose 1.6% and settled at the highest level since last October. Phemex's riskiness continued to rise after the Jan 23 hack and is now up 1.3X.
Bybit has also become 1.3X riskier. While the bridging loans from Bitget and others have helped them ride out the initial storm, the long-term impact of this massive hack on their core business is still being revealed.
Risk Snapshot
Each week, Agio Ratings calculates the one-year probability of default (PD) for multiple exchanges. These are the PDs for a sample of exchanges as of the last day of the month. PDs marked in green have improved relative to the prior month; those in red deteriorated.
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About Agio Ratings
Agio Ratings is your trusted source of credit insights for the digital asset market. We serve market makers, funds, regulators, banks and insurers. Our expert team of credit analysts, statisticians and data scientists collect observable data to produce probabilities of default for 48 exchanges. We also monitor shifts in short-term risk indicators for more than 80 market participants.
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