The Daily: Balancer hit by $128 million exploit, Hong Kong opens global liquidity access for local crypto exchanges, and more

The following article is adapted from The Block’s newsletter, The Daily, which comes out on weekday afternoons.

Happy Monday! Bitcoin slid below $108,000 to start November after "Uptober" dreams were dashed for the first time in six years as traders took profits amid a cautious market.

In today's newsletter, DeFi protocol Balancer gets drained for $128 million, Hong Kong will allow local crypto exchanges to share global order books, monthly Ethereum stablecoin volume hits a fresh record, and more.

Meanwhile, Kraken unlocks crypto collateral for derivatives across the EU, and Paradigm leads a $7.6 million seed funding round for perp DEX aggregator Liquid.

Let's get started!

P.S. CryptoIQ is now available to everyone. Take the test for a chance to win $20,000! Plus, don't forget to check out The Funding, a biweekly rundown of crypto VC trends. It's a great read — and just like The Daily, it's free to subscribe!

Balancer suffers $128 million exploit

DeFi protocol Balancer suffered an exploit on Monday that drained about $128.6 million in assets from its vaults across multiple chains, according to blockchain security firm PeckShield.

• Onchain data showed large, unusual withdrawals of assets, including WETH, osETH, and wstETH, indicating that the attackers exploited a vulnerability in Balancer V2 Composable Stable Pools.
• Balancer later confirmed the incident, saying its engineering and security teams paused all affected pools that could be paused, while stressing that Balancer V3 and other pools remain unaffected as it continues to investigate, with a full post-mortem to follow.
• Onchain analysts traced the likely cause to a faulty access-control check that let attackers convert fake fee balances into real assets.
• Meanwhile, Berachain validators halted their network to conduct an emergency hard fork aimed at recovering roughly $12 million in user funds linked to the same Balancer exploit.
• Immediately following the incident, the price of Balancer's native token fell by over 4%, according to The Block's BAL price page, dropping further throughout the day amid a broader crypto market selloff.

Hong Kong to allow local crypto exchanges to access global liquidity pools

Hong Kong's Securities and Futures Commission will allow locally licensed crypto exchanges to share global order books with their overseas platforms to boost liquidity and price discovery.

• The new framework marks a shift from Hong Kong's pre-funded, locally settled model, enabling more efficient international market access.
• A separate circular on Monday also exempted Hong Kong Monetary Authority-licensed tokens and stablecoins from the 12-month trading history rule for professional investors.
• SFC chief Julia Leung said the reforms aim to balance competitiveness and oversight as Hong Kong aims to position itself as a global crypto hub.

Monthly Ethereum stablecoin volume hits record $2.8 trillion in October

Stablecoin transactions on Ethereum hit a record $2.8 trillion in October, up 45% month-over-month, as traders sought yield during market pullbacks.

• USDC led with $1.6 trillion in volume, followed by USDT at $895 billion, while DAI activity declined for a second consecutive month as adoption of its upgraded version, USDS, grows.
• Analysts said the surge reflects traders rotating capital and managing liquidity using stablecoins as yield tools and market hedges.
• Stablecoin issuers captured around 65% to 70% of all protocol revenue in October, underscoring their dominance and growing role in non-speculative crypto use cases.

Powell's hawkish tone leaves crypto investors in a 'state of limbo,' CoinShares says

Crypto investment products saw $360 million in net outflows globally last week, after the Fed's remarks on the likelihood of further rate cuts added to market uncertainty, according to CoinShares.

• "Despite the recent U.S. interest rate cut, investors interpreted Fed Chair Jerome Powell's comments on the likelihood of another cut in December as 'not a foregone conclusion,'" Head of Research James Butterfill wrote in a Monday report.
• "This hawkish tone, combined with a notable absence of key U.S. economic data releases, appears to have left investors in a state of limbo," he said.
• Bitcoin ETPs bore the brunt with $946 million exiting globally, while Ethereum funds attracted $57.6 million in inflows and Solana products also bucked the trend, drawing in $421 million, driven by strong demand for the newly launched U.S. spot ETFs.

'Orange is the color of November': Michael Saylor's Strategy buys another 397 BTC

Strategy (formerly MicroStrategy) bought 397 BTC for $45.6 million at an average price of $114,771 last week, raising its total holdings to 641,205 BTC worth about $69 billion.

• The latest acquisitions were funded by proceeds from the issuance and sale of the company's Class A common stock, MSTR, and its STRK, STRF, and STRD perpetual preferred stocks.
• Saylor again hinted at the company's latest acquisitions ahead of time, sharing an update on Strategy's bitcoin tracker on Sunday, stating, "Orange is the color of November."
• While Strategy's stash now equates to over 3% of the total 21 million bitcoin supply, its stock remains down 41% from the summer highs as its market cap-to-NAV premium narrows to roughly 1.1.

In the next 24 hours

• ECB President Christine Lagarde is scheduled to speak at 5 a.m. ET on Tuesday. U.S. FOMC member Michelle Bowman follows at 6:35 a.m.
• SmartCon kicks off in New York.

Never miss a beat with The Block's daily digest of the most influential events happening across the digital asset ecosystem.

Disclaimer: This article was produced with the assistance of OpenAI’s ChatGPT 3.5/4 and reviewed and edited by our editorial team.

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