The implications of crypto hacker attacks on financing new ventures
Article Date: 29 May 2025
Article URL: https://www.tandfonline.com/doi/full/10.1080/00472778.2025.2503375?af=R
Article Image: Cover image
Summary
This research article (Journal of Small Business Management) examines how major cryptocurrency heists affect the market efficiency and liquidity of Initial Coin Offerings (ICOs). Using a signalling theory framework, the authors apply permutation entropy and liquidity measures to assess changes following three significant crypto thefts. The core finding is a marked drop in both market efficiency and liquidity within five days after an attack. Further analysis using Granger causality shows that ICO tokens on the same blockchain as the compromised token suffer the greatest impact, indicating contagion risk across blockchain ecosystems. The paper concludes with practical recommendations for start-ups to signal security commitment — for example, security audits, multisignature wallets and transaction lock-up periods — and highlights implications for investors and regulators assessing ICO risk.
Key Points
- The study uses permutation entropy and liquidity metrics to measure market efficiency and trading liquidity around three major crypto heists.
- Efficiency and liquidity of ICO tokens fall significantly within five days of a heist, indicating short-term market disruption.
- Tokens that share the same blockchain as the attacked token are most affected, demonstrating interconnected risk in blockchain ecosystems.
- Granger causality tests support the contagion effect, signalling that shock transmission is measurable and economically meaningful.
- Practical recommendations for start-ups include security audits, multisignature wallets and transaction lock-up periods to signal commitment and reduce investor uncertainty.
Why should I read this
Short version: if you’re involved with ICOs, investing in crypto tokens or advising start-ups, this paper shows how quickly a hack can sap liquidity and wreck price efficiency — and why tokens on the same blockchain get hit hardest. It’s a neat, evidence-backed wake-up call with practical fixes you can actually use.
Context and relevance
As ICOs and token-based fundraising remain part of entrepreneurial finance, understanding security externalities is crucial. This study ties empirical market metrics to signalling theory, clarifying how security events alter investor perceptions and trading dynamics. The findings are relevant to founders designing token launches, investors pricing ICO risk, and regulators monitoring systemic vulnerabilities across blockchains. The demonstration of contagion across tokens on the same blockchain emphasises that security lapses are not isolated — they can degrade the financing environment for unrelated start-ups operating on the same technical infrastructure.
Source
Source: https://www.tandfonline.com/doi/full/10.1080/00472778.2025.2503375?af=R