After the significant Ethereum (ETH) theft from Bybit on February 21, 2025, the exchange has seen a notable recovery in its reserves, surpassing 200,000 ETH by February 23. This rebound marks a positive shift following the sharp decline in reserves immediately after the hack, but uncertainty remains as the market sentiment is mixed.

A Sharp Drop, Then Recovery

Bybit’s Ethereum exchange reserves were dramatically impacted by the February hack. Before the incident, the exchange held 443,691 ETH, but following the attack, reserves plunged to 39,692 ETH. However, by February 23, 2025, the reserves had rebounded to over 200,000 ETH, signaling that the exchange was working hard to restore liquidity and reassure the market.

The swift recovery in reserves is seen as a positive sign by traders, indicating that the worst of the market disruption may be over. Historically, these types of rebounds in exchange reserves have preceded price stabilization in the cryptocurrency market, reducing concerns about continued declines in ETH prices.

Netflows: Stabilizing Capital Flow

In line with the reserve recovery, Bybit’s Ethereum netflow data has also shown signs of stabilization. Following the hack, netflows dropped sharply to -6.6K ETH on February 21, signaling panic selling and withdrawals. However, by February 23, netflows shifted back to positive territory, with inflows increasing to offset the prior outflows.

This stabilization in netflows mirrors the recovery in exchange reserves, further supporting the idea that Bybit is actively replenishing its ETH holdings and maintaining liquidity. Historically, similar recoveries have been followed by price stabilization or even reversal, especially after security breaches on centralized exchanges.

Funding Rates and Market Sentiment

Despite these signs of recovery, Ethereum’s market sentiment remains mixed, especially when looking at the funding rates. Following the hack, Ethereum’s funding rates turned negative, indicating increased selling pressure as traders aggressively shorted ETH in response to the uncertainty.

A decline in funding rates often leads to sideways price action or increased volatility, especially when major resistance levels like the $3,000 mark remain unbroken. ETH has struggled to maintain upward momentum, reflecting a typical pattern seen in the aftermath of hacks and security issues—short-term liquidation cascades followed by prolonged periods of consolidation.

The market sentiment continues to be fragile, with ETH price volatility remaining high until funding rates stabilize or new bullish catalysts emerge.

Institutional Activity: Hedging or Accumulating?

The rise in Ethereum’s CME futures open interest (OI) also sheds light on institutional sentiment. On February 24, 2025, Ethereum’s OI peaked at $3.26 billion, indicating increased speculative activity as ETH prices hovered near $2,819.69. This surge suggests that institutional traders are strategically positioning themselves, either hedging against further downside risks or preparing for potential price movements.

Despite the recovery in Bybit’s Ethereum reserves and netflows, institutional traders appear cautious, balancing optimism with concerns about market volatility. The relationship between CME futures OI and exchange reserves complicates the outlook, suggesting that while some institutional investors are hedging, others remain wary of continued risks in the market.

Conclusion: Stabilization with Uncertainty Ahead

While Bybit’s Ethereum reserves and netflows recovery after the hack signals a step toward market stabilization, negative funding rates and cautious institutional activity point to ongoing uncertainty. Ethereum’s price is likely to continue facing volatility as traders wait for funding rates to stabilize or for new bullish catalysts to drive the market forward.

The next significant price move for ETH will depend on whether market conditions shift positively, stabilizing funding rates and clearing the way for further upward momentum. Until then, the market remains on edge, with potential for both risk and reward in the coming days.