Ethereum Faces 420K ETH Supply Overhang, Yet Bulls Remain Hopeful - Why?
Ethereum faces a critical test as 420k ETH raises sell-off concerns, while Binance's financial backing strengthens the case for a potential market reversal.
Written by: Ritika Gupta Reviewed by: Jacob Thomas
Updated: 15:00 EDT, October 31, 2026
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The market is currently digesting the aftermath of the post-hack developments. The on-chain data so far appears promising: Binance has frozen funds, investigations are underway, and exchange reserves indicate limited market impact. High-cap assets like Ethereum have only dropped by around 3% this week, suggesting relatively contained selling pressure.
However, the fate of the $6.3 billion in stolen funds could be the bigger story. According to an analyst, the Binance hacker may have found a clever workaround. Tether and Circle had frozen significant amounts of USDT and USDC, but the attacker allegedly deposited the stolen USDT into Aave as collateral and borrowed Ethereum against it.
Why does this matter? While Tether can freeze USDT held as collateral, it cannot directly freeze ETH already borrowed from Aave. This means the attacker will have access to their liquid ETH while the collateralized assets remain stuck in the protocol, making recovery more difficult.
The scale is noteworthy: the Lazarus Group is reported to hold over 420,000 ETH that cannot be frozen. This creates a potential supply overhang, which could exert additional selling pressure on the market.
However, market reaction so far suggests otherwise. Some analysts see this "dip" as an opportunity to buy back into Ethereum, considering Binance's pledge to cover all losses using its SAFU fund and company funds. Yet, with the SAFU fund containing only around $1.15 billion in BTC, covering less than 35% of the estimated losses, Binance would need to absorb the remaining $2.2 billion.
Key Takeaway: Binance appears to have the financial backing to weather the storm.