FLOW Token Experiences Significant Drop While Crypto Market Rebounds—Here's the Situation

Despite a general recovery in the cryptocurrency market, Flow (FLOW) is struggling, showing a notable decrease in value over the past 24 hours.

Key Takeaways

FLOW token dropped nearly 14% as the broader crypto market surged.
The decline is tied to a recent security breach with significant asset loss.
Flow Foundation is actively working on a recovery plan following the $3.9 million exploit.
Over 99.9% of user accounts remain unaffected and will be operational upon network relaunch.
It is uncertain whether the recovery efforts will rebuild market confidence in FLOW.

This decline follows the network's ongoing efforts to recover from a recent security breach.

Why is FLOW Token's Value Declining?

Today, the cryptocurrency market highlighted a positive trend, rising by nearly 2.3%, with all of the top 10 assets showing gains. Bitcoin (BTC) surpassed $90,000, and Ethereum (ETH) soared past $3,000.

However, FLOW did not share in this upturn. According to BeInCrypto Markets data, the altcoin witnessed a drop of nearly 14% in the last 24 hours, marking it as the second-largest daily loser on CoinGecko.

It's important to note that this downturn isn't just a single day phenomenon. Similar to the general market trends, FLOW has encountered difficulties over the past few months.

The situation worsened on December 27, when the network faced a security incident, causing a staggering price drop of over 50% in one day, which led to a new all-time low of $0.079 on Binance. Major South Korean exchanges, including Upbit and Bithumb, halted deposits and withdrawals of FLOW.

“As a result of the Digital Asset Exchange Alliance (DAXA)'s caution, FLOW has been classified as a trading caution asset by various member exchanges. Deposit and withdrawal services for FLOW have been suspended. Once services resume, only withdrawals will be reactivated, and announcements will follow regarding the restoration of deposit services,” translated Upbit's notice explains.

Flow Foundation Enters Recovery Phase After $3.9 Million Exploit

On December 27, a hacker managed to transfer around $3.9 million in assets off the Flow network by exploiting a vulnerability in its execution layer. The Flow team quickly contained the breach, thus preventing further losses.

The Flow Foundation reassured users that the incident did not jeopardize any existing user balances. “The funds that were compromised are within a range that does not endanger network solvency or user assets. Our primary aim is to ensure a safe recovery and a gradual restart,” stated the foundation.

Initially, Flow considered reverting the network to a state prior to the exploit. However, after gathering significant feedback from validators and developers, the Foundation modified its strategy and presented a new recovery plan.

This revised method avoids a network rollback or major reorganizations, focusing instead on preserving legitimate user transactions. The foundation asserts that over 99.9% of accounts remain unaffected and can operate normally upon relaunch.

“Upon restarting the network, accounts recognized as recipients of illicitly minted tokens will be temporarily restricted as a precaution. The Flow core development team will also introduce a software upgrade for node operators. This upgrade will allow the Community Governance Council to handle the fraudulent assets,” the post elaborated.

The Foundation later confirmed that validators approved a software upgrade, steering the network into a remediation and testing phase. Phase 1 of the Flow Network Recovery plan is set to commence at 6 a.m. PT.

During this phase, regular operations for the Cadence environment will resume, while accounts affected by the exploit will continue to be temporarily restricted. The EVM environment will also operate in read-only mode. According to the Foundation, over 99.9% of Cadence accounts will regain full functionality at this point.

This development underscores the team's commitment to restoring normal activities. However, it remains to be seen whether these recovery efforts will be sufficient to restore market confidence and foster a price rebound.