Grayscale: Binance hack makes crypto market safer in the long run

The crypto market has been hit hard by the huge hack at Binance. At the largest crypto exchange in the world, crypto was stolen for about 6.3 billion dollars. Nevertheless, asset manager Grayscale also sees a positive side to the incident. According to the company, the hack could ultimately have major consequences for the security of the crypto market.

In a new report, Grayscale states that the hack could temporarily damage investor confidence. In the longer term, the company expects crypto exchanges to further improve their security.

The attack shows how vulnerable even large crypto exchanges can be. Research by Binance shows that the hackers prepared their attack for months. Through a fake job interview, they managed to install malicious software on an employee's computer.

They then penetrated further and further into Binance's internal systems. They also used an internal AI tool to access other employees' computers.

According to research director Zach Pandl, the incident shows how important professional security and secure storage of cryptocurrencies are.

More and more American investors are therefore investing in crypto via stock exchange funds. These funds use specialized parties who are responsible for the safekeeping of the underlying crypto coins.

Various security measures are applied. For example, cryptocurrencies are often stored offline and multiple digital signatures are required to approve transactions. Some parties also have insurance against certain losses.

The hack took place on October 29 and is attributed to North Korea by the US FBI. This brings total losses from crypto hacks to more than $8 billion this year.

Nevertheless, according to Grayscale, the damage to Binance's customers has been limited. The stock exchange has now fully covered 95 percent of the affected assets.

The remaining 5 percent consists of less liquid crypto coins that take more time to recover. Binance has pledged that customers will not suffer any loss in the end.

In addition, about $2.9 billion worth of stolen crypto has been frozen by stablecoin issuers, including Tether and Circle. That amounts to about 45 percent of the total amount. Grayscale expects that these funds can eventually be returned to Binance.

According to Grayscale, despite the historical theft, a positive development is also visible. Over the years, the financial damage caused by crypto hacks has become relatively smaller compared to the total market value.