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.