Most Hacked Crypto Projects Never Fully Recover, Experts Warn
Nearly four out of five crypto projects that experience a major security breach never fully recover, according to Mitchell Amador, CEO of Web3 security platform Immunefi. Amador said many protocols become effectively paralyzed once an exploit is detected.
“Most protocols are fundamentally unaware of the extent to which they are exposed to hacks, and are not operationally prepared for a major security incident,” he said, noting that teams often freeze as they assess the situation.
Amador added that the initial hours after a breach are typically the most consequential. In the absence of a predefined incident plan, teams hesitate, debate next steps, and misjudge the scope of the compromise. Decision-making slows as they scramble to understand the event, leading to improvisation, delays, and, frequently, additional losses.
Projects also tend to avoid pausing smart contracts due to concerns over reputational impact, while communication with users often breaks down. According to Amador, silence fuels uncertainty and panic. He said that nearly 80% of hacked projects never fully regain momentum, with the main cause being operational disruption and loss of trust during the response rather than the initial capital outflow.
Most projects fail to survive even after remediating a major breach
Trust has become the most fragile asset in the sector. Alex Katz, CEO and co-founder of Web3 security firm Kerberus, said that even when the technical issue is addressed, the incident often marks the start of terminal decline. He noted that while there are exceptions, a major exploit is usually fatal as users exit, liquidity diminishes, and reputational damage persists.
Katz observed that, while smart contract exploits previously dominated headlines, recent losses increasingly result from operational and human factors. He said human error remains the weakest link, with many incidents stemming from users approving malicious transactions, engaging with counterfeit interfaces, or inadvertently exposing private keys.
Earlier this month, a crypto user lost more than $282 million in Bitcoin (BTC) and Litecoin (LTC) in one of the largest social engineering incidents recorded in the industry. The attacker allegedly posed as Trezor support and persuaded the user to disclose the hardware wallet seed phrase.
Crypto-related hacks rose sharply in 2025, affecting major platforms and individual wallets, with total losses reaching $3.4 billion, the highest level since 2022. Three incidents, including the $1.4 billion Bybit breach, accounted for 69% of losses through early December.
Amador said that beyond the Bybit case, there has been an uptick in attacks that bypass smart contracts entirely and instead exploit protocol-level vulnerabilities.
He added that advances in artificial intelligence have amplified the effectiveness of social engineering, enabling attackers to deliver thousands of tailored phishing messages per day at scale.
2026 could be the strongest year yet for crypto security
Despite recent losses, experts remain optimistic. Amador believes smart contract security is improving rapidly due to stronger development practices, more rigorous audits, and more mature tooling. He expects 2026 to be the strongest year so far for smart contract security, supported by broader adoption of onchain monitoring, firewalling, and threat intelligence.
However, he emphasized that incident response readiness remains a critical gap. Amador advised teams to act decisively and communicate immediately when an incident occurs, even if full details are not yet known, adding that pausing protocols early is generally less damaging than allowing uncertainty to escalate.
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