What happened
Today has been a relatively rocky day for both equity and cryptocurrency investors. At 11:15 a.m. ET, the overall crypto market had dropped by 0.7% over the past 24 hours, led by alt coins such as Solana (CRYPTO:SOL), which saw a decline of 7.3% over the same time frame.
Today’s big news affecting Solana and a handful of other tokens is the announced $320 million hack of Wormhole. This is reported to be the second-largest crypto hack in history, and the fact that this hack has so much to do with the Solana network has some investors concerned. Solana reached an intraday low of more than 10% earlier this morning after the news broke.
Image source: Getty Images.
So what
Wormhole is one of the largest bridges between Solana and other blockchains such as Ethereum, Terra, Avalanche, Polygon, and the Binance Smart Chain. This bridge reportedly has over $1 billion in total value locked, and it has been locked down, its portal unavailable for the time being as developers scan the extent of the damage. For now, Wormhole states that it appears only Wrapped Ether (wETH) was affected by this hack, with the other tokens unaffected.
Wormhole has since requested a return of the tokens in exchange for a “bug bounty” of $10 million, but there’s no indication the hackers have returned the wETH to Wormhole.
Now what
This hack highlights one of the key risks inherent in the cryptocurrency space. Malicious actors such as hackers can attack networks, creating headaches for individuals, particularly given the relative lack of legal recourse they have to recover their funds.
The fact that the hackers were able to “exploit the Solana VAA verification and mint tokens,” according to Wormhole, clearly has Solana investors on edge today. Given the recent network disruptions Solana has seen, this may simply be one too many headwinds to deal with right now.
Solana is a token I remain bullish on over the long term, due to a number of fundamental characteristics that differentiate this network from others. However, these headlines are certainly bearish for the token over the near term.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.