How Do Hacks Impact Crypto Price Performance?

moneycontrol.com:

There have been 124 crypto hacks between January 2020 and October 2022, resulting in losses amounting to $5.18 billion, according to DeFi TVL aggregator DeFiLlama.

While there are many different modes in which crypto hacks have taken place since the start of this decade, their impact on the affected token’s price does draw surprising results.

While rug-pulls constitute less than 10% of all these hacks, vulnerabilities in blockchain protocol architecture continue to be a soft target for attackers, followed by exploits on the network’s infrastructure or its ecosystem.

Rug pulls happen when fraudulent developers create a new crypto token, pump up the price and then pull as much value out of them as possible before abandoning them as their price drops to zero.

In terms of the modus operandi employed, nearly a third of all the evaluated crypto hacks are contributed by compromises in the private keys of investors and reemphasize the importance of storing them securely.

While these hacked projects have seen their native token’s price plummet by ~50% on average, some tokens have lost as much as 99% of their value in the aftermath.

Surprisingly though, a crypto hack does not necessarily lead to the total collapse of the project, and in some cases, the underlying token has even gone on to bounce back to price levels higher than prior to the attack.

With this background, let us delve deeper into the insights offered by DeFiLlama’s analysis and understand what investors should expect in the scenario of a crypto hack.

Crypto hack categories and methods

DefiLlama characterized the hack in their dataset according to whether it targeted a flaw in the infrastructure (its technology), the smart contract language (digital contracts stored on a