The $1.5 billion hack of Bybit — the largest in crypto history — has put the entire industry on high alert. The attack, reportedly carried out by North Korea’s Lazarus Group, resulted in the theft of over 401,000 ETH, reinforcing the reality that no exchange is safe from sophisticated cyber threats, and any platform can be at risk.

Bybit’s response is critical. The positive takeaway is that Bybit has re-established a 1:1 asset backing for its clients and closed the “ether gap.” However, this temporary situation — where users shoulder the burden of centralized exchange (CEX) security failures could drive staking participants toward self-custody, keeping only the bare minimum on exchanges for transactions.

While the full fallout of this breach is still unfolding, it may serve as a catalyst for both retail and institutional staking participants to rethink their strategies. Here’s how the hack could reshape staking.

Potential Staking Losses

The hack resulted in the theft of approximately 400,000 ETH, which is nearly $1 billion in losses at an average price of $2,600 per ETH. Beyond the immediate financial hit, the Ethereum staking yield — hovering around 4% annually — means a loss of roughly 16,000 ETH in yearly staking rewards.

For perspective, if these stolen ETH were spread out across 100 stakers, each would have lost 160 ETH in rewards. This is a significant blow, particularly for retail investors who may lack the financial resilience to absorb such losses.

Declining Staking Share on Centralized Exchanges

The Bybit hack may be a turning point for the crypto industry, highlighting the risks of staking on centralized platforms. The trend is already visible in recent data: in the last six months, the amount of staked ETH on centralized exchanges has dropped from 8,597,984 ETH in September 2024 to 8,024,288 ETH in February 2025, representing a 6.67% decline. This change comes amid growing concerns about security and transparency on centralized platforms.

Additionally, following the hack from Feb. 20 to Feb. 23, staked ETH on CEXs fell by 0.56%, while on-chain staking (excluding CEXs) increased by 0.31%. This suggests a shift in the staking landscape, with users increasingly moving their assets away from centralized exchanges to more secure, non-custodial staking solutions or hardware wallets.

This change could have long-term implications for the crypto market. Centralized exchanges, which have long dominated the staking ecosystem, may see their influence wane. As stakers migrate to decentralized alternatives, CEXs’ roles in governance, reward distribution, and network upgrades could diminish. In the long-term, this may result in the reshaping of the staking market, with decentralized alternatives taking center stage.

Institutional Adoption at Risk

High-profile hacks like Bybit’s inevitably make institutional investors more cautious about entering the crypto market. When auditors evaluate staking products, including ETH ETFs, billion-dollar security breaches can prompt legal and compliance teams to hit the brakes on crypto allocations.

This stagnation could push back the timeline for achieving new price highs and delaying broader adoption.

Given the rising threat of hacks, it is crucial for both retail and institutional investors to embrace audited and certified self-custody solutions. Securing assets through non-custodial wallets and decentralized platforms can significantly mitigate the risks posed by centralized exchanges. At the same time, exchanges need to work to rebuild trust by enhancing their security measures, conducting regular audits, and offering insurance schemes for users affected by breaches.

Moreover, the entire crypto community — including developers, exchanges, regulators, and users — needs to come together to balance innovation with security. This collaboration is essential for the long-term viability of the industry. By strengthening the overall security infrastructure, we can create an environment where both retail and institutional participants can confidently engage with the crypto market.