Top meme tokens traded under pressure as a multimillion dollar hack of Shiba Inu’s layer-2 network, Shibarium, dented investor confidence in joke cryptocurrencies.

On Sunday, Shibarium fell victim to a flash loan attack on its validator system, which drained about $2.4 million in ether (ETH) and SHIB. The CoinDesk Memecoin Index has dropped 6.6% in the past 24 hours. The broader market CoinDesk 20 Index (CD20) is down just 2.3%.

The attacker borrowed 4.6 million BONE, the governance token for the Shiba Inu ecosystem, often linked to the decentralized exchange (DEX) ShibaSwap, through a flash loan to gain control of the majority of validator keys. The keys act as gatekeepers of the network, confirming transactions and ensuring security.

With that control, the attacker was able to game the system into approving unauthorized transactions and walk away with a large amount of crypto assets from the bridge that connects Shibarium with the Ethereum blockchain. The process is akin to someone temporarily taking over a bank’s security system to approve unauthorized withdrawals. A flash loan is a loan raised with no upfront collateral and returns the borrowed assets within the same blockchain transaction.

The Shiba inu team was able to prevent a bigger, more serious breach because the BONE tokens used to gain control were reportedly tied to validator 1 and remained locked by the staking rules.

Nevertheless, markets reacted negatively breach, which again underscores the perennial security issues with blockchain technology.

Memecoins drop, broader market bid

SHIB fell by the most in three weeks on Sunday (UTC), losing 4% $0.00001369, and has continued to weaken to trade recently at $0.00001359. The cryptocurrency experienced considerable volatility throughout the 23-hour trading window ended Sept. 15 at 02:00 UTC, with the aggregate range encompassing $0.000006191, a 4% oscillation from peak to trough.

The session commenced with pre-dawn fragility as SHIB retreated from $0.000014156 to establish a pivotal trough of $0.000013547 at 14:00 UTC. Volume of 1.064 trillion tokens surpassed the 24-hour mean, signaling robust distribution pressure and prospective capitulation, according to CoinDesk Research’s technical analysis model.

The BONE token, which initially doubled to over 36 cents, is now down over 2% on a 24-hour basis, trading at around 20 cents.

According to the technical analysis model:

• SHIB established a critical underpinning at $0.000013547 during elevated volume selling pressure exceeding 1.064 trillion tokens.
• The token constructed successive higher lows and consolidation parameters between $0.000013600-$0.000013780.
• Recovery momentum is demonstrated by ascending channel formations with sustained higher lows, indicating potential continuation towards the $0.000014000 resistance.
• Volume patterns exceeded 24-hour averages during the decline phase, confirming potential capitulation levels.
• Terminal hour trading exhibited decisive upward momentum with 1% appreciation, confirming a breach above the resistance threshold.

Large DOGE transfers add to bearish sentiment

Meanwhile, SHIB’s peer dogecoin (DOGE) fell 4% to 27.80 cents on Sunday and has since lost further 5% to 27.36 cents, according CoinDesk data.

A massive transfer of DOGE to a centralized exchange likely added to the bearish mood in the market. According to Whale Alert, crypto exchange OKX received 119,306,143 DOGE, worth over $34 million, from an unknown wallet. Such large transfers are typically associated with an intention to liquidate holdings.

The Financial Times (FT) reported on Monday that cryptocurrency groups are urging the Bank of England (BoE) to scrap proposals limiting the amount of stablecoins individuals and businesses can own.

The group warned that the rules would leave the UK with stricter oversight than the U.S. or the European Union (EU).

According to the FT, BoE officials plan to impose caps of 10,000 british pounds to 20,000 british pounds ($13,600–$27,200) for individuals and about 10 million british pounds ($13.6 million) for businesses on all systemic stablecoins, defined as tokens already widely used for payments in the U.K. or expected to be in the future.

The central bank has argued the restrictions are needed to prevent outflows of deposits from banks that could weaken credit provision and financial stability.

The FT cited Sasha Mills, the BoE’s executive director for financial market infrastructure, as saying the limits would mitigate risks from sudden deposit withdrawals and the scaling of new systemic payment systems.

However, industry executives told the FT the plan is unworkable.

Tom Duff Gordon, Coinbase’s vice president of international policy, said “imposing caps on stablecoins is bad for U.K. savers, bad for the City and bad for sterling,” adding that no other major jurisdiction has imposed such limits.

Simon Jennings of the UK cryptoasset business council said enforcement would be nearly impossible without new systems such as digital IDs. Riccardo Tordera-Ricchi of The Payments Association told the FT that limits “make no sense” because there are no caps on cash or bank accounts.

The U.S. enacted the GENIUS Act in July, which establishes a federal framework for payment stablecoins. The law sets licensing, reserve and redemption standards for issuers, with no caps on individual holdings. The European Union has also moved ahead with its Markets in Crypto-Assets Regulation (MiCA), which is now fully in effect across the bloc.

Stablecoin-specific rules for asset-referenced and e-money tokens took effect on June 30, 2024, followed by broader provisions for crypto-assets and service providers on Dec. 30, 2024. Like the U.S. approach, MiCA does not cap holdings, instead focusing on reserves, governance and oversight by national regulators.

Fears of a downside for bitcoin (BTC) and ether (ETH) have eased substantially, according to the latest options market data. However, the pace of the next upward move in these cryptocurrencies will largely hinge on the magnitude of the anticipated Fed rate cut scheduled for Sept. 17.

BTC’s seven-day call/put skew, which measures how implied volatility is distributed across calls versus puts expiring in a week, has recovered to nearly zero from the bearish 4% a week ago, according to data source Amberdata.

The 30- and 60-day option skews, though still slightly negative, have rebounded from last week’s lows, signaling a notable easing of downside fears. Ether’s options skew is exhibiting a similar pattern at the time of writing.

The skew shows the market’s directional bias, or the extent to which traders are more concerned about prices rising or falling. A positive skew suggests a bias towards calls or bullish option plays, while a negative reading indicates relatively higher demand for put options or downside protection.

The reset in options comes as bitcoin and ether prices see a renewed upswing in the lead-up to Wednesday’s Fed rate decision, where the central bank is widely expected to cut rates and lay the groundwork for additional easing over the coming months. BTC has gained over 4% to over $116,000 in seven days, with ether rising nearly 8% to $4,650, according to CoinDesk data.

What happens next largely depends on the size of the impending Fed rate cut. According to CME’s Fed funds futures, traders have priced in over 90% probability that the central bank will cut rates by 25 basis points (bps) to 4%-4.25%. But there is also a slight possibility of a jumbo 50 bps move.

BTC could go berserk in case the Fed delivers the surprise 50 bps move.

«A surprise 50 bps rate cut would be a massive +gamma BUY signal for ETH, SOL and BTC,» Greg Magadini, director of derivatives at Amberdata, said in an email. «Gold will go absolutely nuts as well.»

Note that the Deribit-listed SOL options already exhibit a strong bullish sentiment, with calls trading at 4-5 volatility premium to puts.

Magadini explained that if the decision comes in line with expectations for a 25 bps cut, then a continued calm «grind higher» for BTC looks likely. ETH, meanwhile, may take another week or so to retest all-time highs and convincingly trade above $5,000, he added.