Ethereum Hack & Market Dip: What’s Next for ETFs?

Cryptocurrency investors are being reminded this week of the volatility that has become a trademark of the asset class. 

Across social media the conversation has been about whether to buy low, ride this out, or even completely cash out. 

Crypto poster child bitcoin is down about 7% over the past week and nearly 17% over the past 30 days. Still, it’s gained 55% over the past year. 

Ethereum, meanwhile, is down 11% over the past week, 27% over the past month, and 22% over the past 12 months. 

Many of the big thinkers and proud crypto skeptics are pointing to the recent hack that involved the theft of $1.5 billion worth of Ethereum. That largest asset theft ever involving the cryptocurrency exchange Bybit is still being unraveled. 

Crypto Volatility in Perspective

Notably, Ethereum dropped 7.6% Friday in an immediate reaction to the news of the breach but recovered the loss by Sunday. 

Headlines aside, consider the following:

First, the Ethereum hack didn’t involve any U.S.-based investors or platforms, which one could argue says something about our regulatory framework. 

And second, according to crypto expert Ric Edelman, the structure of the spot bitcoin and Ethereum ETFs “make such a hack virtually impossible.” 

“The ETFs are managed by cryptocurrency professional who are far more sophisticated, and they have policy procedures and oversight to defend against these kinds of attacks,” he said. “And most of the ETFs are offered by some of the largest asset management firms in the world who would stand behind their products and provide financial restitution if necessary.”

Edelman, founder of the Digital Asset Council of Financial Professionals and a member of the etf.com Editorial Advisory Board, cited the Ethereum hack as an example of “why most investors should own crypto through ETFs.”

However, in terms of catalysts triggering the sudden burst of crypto price volatility, Edelman ranks the Ethereum hack third behind two other factors “coalescing to create bearishness for the moment.”

As he sees it, the biggest factor rattling investors' nerves is rising concerns of tariff threats and actions coming out of the Trump administration that is “creating concerns among investors that it could limit economic growth and possibly lead to a recession.”

Calendar Watching

The second biggest driver of crypto volatility, Edelman said, comes down to the calendar.

With Jan. 10 marking the first anniversary of the first spot bitcoin ETFs, Edelman said investors might be taking some profits after having crossed into long-term capital gains territory.

“Most of the people who own the ETFs purchased in the two or three months following the launch and they’re now converting some capital gains to long term,” he said. “There’s a lot of profit taking and portfolio rebalancing right now.”

Edelman is not discounting the crypto pullback but said he expects the current bout of volatility to be “temporary.”

“I don’t know how low it will go, but in my view, it is another buying opportunity,” he said. “There is a lot of favorable activity going on at the SEC and in congress that is going to allow banks and brokerage firms to allow trading of cryptocurrencies and that will lead to hundreds of billions worth of assets to flow into crypto in 2025.”