Q9 Weekly | Revealed: 600k Real Life Hacks You Need to Know

14 October 2022

Q9 Capital: www.q9capital.com

• Whales accumulating despite price weakness
• +12,000 crypto projects have ceased trading this year
• Celsius 600k customer database leaked, Oct worst ever month for crypto hacks

Crypto markets pulled back on Thursday in anticipation of new federal data, which revealed consumer prices rose 8.2% over the past 12 months. Thursday’s CPI data likely cements consecutive 0.75 point rate hikes in November and December, diminishing investor appetites for riskier assets. Major cryptoasset prices will likely be macro driven for some time to come.

However, whales have been on their longest sustained Bitcoin accumulation streak since May, adding 46,173 BTC (worth around $929mn) to their holdings since Sept 27th. The accumulation streak has also coincided with a drop in the whale’s holdings of USDT. Positive activity among whale wallets (holding between 100 to 10,000 BTC) has been rare in 2022, and this signals they believe BTC has reached a bottom and could be poised for a bounce upwards.

Ethereum reached a post-Merge milestone as it became deflationary for the first time since the Ethereum blockchain switched to proof-of-stake (PoS). More Ether was burned verifying transactions than was created in the same period, which led to a reduction of 0.13% in supply over the last week, equivalent to about 4,000 tokens. Since ETH is no longer being mined, the amount hitting the market on a daily basis is reduced considerably by a margin upwards of 90%.

ETH Supply Since Merge

New Hacks

October has become the worst ever month for crypto hacks… with two more weeks left to go. Over $718mn has been stolen from DeFi protocols across eleven different hacks this month so far — according to Chainalysis.

Back in 2019, most hacks targeted centralised exchanges, and prioritising security has seemingly gone a long way for them. Now the vast majority of targets are DeFi protocols. Cross-chain bridges remain the major target, with 3 bridges breached this month and nearly $600mn stolen, accounting for 82% of this month’s losses and 64% of losses all year.

This year will likely surpass 2021 as the biggest year for hacking on record. So far, hackers have grossed over $3bn across 125 hacks.

Source: Chainalysis

Source: Chainalysis

Source: Chainalysis

Zombieland

Over 12,000 crypto projects have effectively ceased trading this year according to Nomics — they’re not dead technically, but like zombies, not quite alive either.

Coins That Haven’t Traded for a Month by Year

Source: Nomics

During last year’s price run-up, thousands of crypto startups issued new tokens to support their projects, and bullish sentiment meant there was ample demand for the market to absorb the vast majority of them and still drive prices higher. There was plenty of money, attention, and liquidity for new and existing projects.

However, in this ongoing bear market, even good projects with utility are struggling to sustain their operations as they lose access to capital and funding. Nomics analysis of coin activity discovered more than 12,100 tokens have become “zombies” this year, defined as tokens that have not traded for a month. That’s more than twice as many as in all prior years combined.

With many predicting no letup to the lackluster market environment, the ranks of the zombies will likely increase. Crypto projects are going to need to ensure they’re ready for the lows as much as they want to ride the highs.

Record Leak of Records

A court filing has released the entire customer database of Celsius. The document showed customer names, transaction types and amounts, and the types and quantities of tokens held, among other information… What a perfectly horrendous illustration of the risks of KYC.

Here are some of the key findings:

• Those who’ve lost more than $12mn made it into the top ten.

Source: Celsius Net Worth

• Celsius had a total of 603,497 customers with total holdings of $6,678,038,295.

Source: r/CelsiusNetwork

• 62% of Celsius user accounts were under $500, and 468 customers had balances over $1mn.

Source: r/CelsiusNetwork

• Celsius customers’ most popular asset is BTC with 46% of all holdings. ETH is 21% and USDC is 12%.

Source: r/CelsiusNetwork

This Celsius leak may go down as one of the greatest breaches of customer information ever and is a massive gift to crypto tracers and scammers looking to join the dots between wallet addresses and the physical identity of the user.

This leak offers a rare gift to professional thieves and tracers and opens new possibilities for identity scammers, hackers, or any other illicit users. The wealthy crypto holders listed could also be targeted with spear-phishing, scams, and even physical extortion.

The paradoxical nature of crypto’s privacy is that the blockchain serves as both a mask and a map: Bitcoin are easy enough to follow from one address to the next. But only a few entities, like the exchanges that allow users to trade their crypto for traditional currency, are able to match the inscrutable strings of numbers and letters in those addresses to real-world individuals or identities.

So when one of those exchanges suddenly dumps a massive internal user database online, they haven’t just spilled their own data. They’ve offered a key to decipher a vastly larger set of financial secrets. When it comes to crypto tracing, following the flow of funds is not really the hard part. The tricky part is the attribution, ie associating an address or transaction with an individual. That’s where datasets like this are key.

The database doesn’t include the wallet addresses that directly identify senders and recipients, but the unique payment amounts, detailed down to more than a dozen decimal places of precision in many cases, nonetheless make it possible to match the payments to the blockchain records and thus the wallet ID’s.

In the News…

• America’s oldest bank, BNY Mellon, will hold crypto now
• Crypto exchange Huobi to be acquired by About Capital
• Google selects Coinbase to take cloud payments with crypto
• Binance-linked blockchain hit by $570mn hack
• Crypto attack swipes $100mn from DeFi service Mango
• Sustainable Bitcoin Protocol wants to make Bitcoin a climate-positive asset
• McDonald’s accepts Bitcoin in Swiss city of Lugano
• Polygon launches testnet for Layer 2 network Hermez
• Paradigm leads $40mn Series A for blockchain data startup nxyz
• Crypto think tank sues US Treasury over Tornado cash sanctions