Bitcoin BTC$83,251.45 closed the third quarter up 40%, outrunning every major asset even as Treasury yields climbed to their highest in more than two decades. Investors poured billions of dollars into exchange-traded funds tied to BTC and other tokens, and several altcoins rallied even harder, leaving analysts convinced a new bull run has arrived.

Yet amid the rally, one familiar stain on the industry’s image kept spreading. That’s hacks and exploits. The money lost in these incidents is small next to the billions flowing into ETFs, but the damage to crypto’s reputation is harder to wave away.

Crypto suffered 247 security incidents in the third quarter, with losses totaling $1.26 billion, according to data tracked by crypto security…