A suspected illicit outflow of nearly 8 trillion won in cryptocurrency from Binance, the world’s largest crypto exchange, has triggered a sharp drop across the market, including Bitcoin. As the security incident spreads beyond weakened investor sentiment into the DeFi (decentralised finance) lending market, broader liquidity concerns are also growing.

CoinPost reported on Oct. 30 (local time) that the incident involved a large amount of funds leaving Binance wallets, fuelling risk-off sentiment among market participants. The fallout appears to be widening as the outflow has led to freeze actions by stablecoin issuers and lending restrictions by DeFi protocols.

The attack is being linked to the abuse of the delegated authority structure in Ethereum Improvement Proposal EIP-7702. The attacker moved funds from Binance wallets, and issuers moved to freeze major stablecoins among the outflow, including Tether (USDT) and USD Coin (USDC).

Some funds, however, flowed into the DeFi lending protocol Aave. The attacker is believed to have borrowed a large amount of Ether (ETH) using USDT as collateral. Aave temporarily suspended new deposits and new loans across a broad range of markets to prevent further risks from spreading.

Market concerns are also rising because the stolen funds were swapped into large amounts of ETH through decentralised exchanges (DEX) and other venues. CoinPost raised the possibility that ETH prices in some markets may have been pushed up locally in this process. The analysis is that abnormal, large-scale fund movements can distort normal supply-demand dynamics and price formation.

By exchange, selling pressure was most heavily concentrated on Binance, where the incident occurred. Selling also briefly intensified on other major exchanges such as Bybit, OKX and HTX, but pressure has eased somewhat recently. On Binance, by contrast, fund outflows were notable as users worried about trading risks from the security incident, and major products in derivatives markets also fell broadly.

Many tokens, particularly altcoins, posted declines of more than 10 percent in open interest (OI). Open interest refers to the size of futures and options contracts that have not yet been liquidated. The sharp drop indicates investors quickly moved to close existing positions and reduce market risk.

The market is focusing not only on the price decline but also on the possibility that tightening liquidity may last longer. The report analysed that the Binance incident led to reduced liquidity across the overall crypto market. When the order book becomes thinner, even relatively small trades can move prices sharply. With liquidation risks in leveraged positions still present, further sharp price swings and possible cascading forced liquidations cannot be ruled out.

Past cases of fund outflows at major centralised exchanges are also drawing renewed attention. About $1.5 billion in cryptocurrency was drained from Bybit on Feb. 21, 2025, and an incident involving about $350 million occurred at Bitget on Sept. 24, 2026. The estimated Binance outflow far exceeds those cases. The report noted that after major exchange incidents in the past, risk-off sentiment strengthened and market liquidity fell in a recurring pattern.

Whether the shock spreads into the DeFi market is also a key variable. Reports said there has not yet been a situation in which direct losses occurred for Aave borrowers, but if restrictions on new deposits and loans become prolonged, liquidity in the lending market could shrink and funding costs could rise. There is concern that a security incident at a centralised exchange could spread through stablecoin freezes and DeFi collateral and lending structures into broader credit instability across decentralised finance markets.

As the incident goes beyond a simple exchange security breach to test liquidity and trust in the crypto market, when fund movements and trading restrictions normalise is expected to be key to market stabilisation.