Bitcoin Bounces Back in the Wake of Another Bithumb Hack
Wednesday saw another $30 million worth of digital currency stolen from the exchange Bithumb, causing another dip in the market. The price of bitcoin dropped from around where it is now, $6,770, to $6,402 in less than four hours. However, when compared to previous breaches in exchange security, the market has responded with far more resilience than it has in the past.
Much of the damage was mitigated by the fast actions taken by the exchange itself. As soon as the hack was reported, Bithumb suspended all crypto trades and moves all of the remaining funds into cold storage servers until the breach could be patched. This allowed technicians to work quickly without having to worry about compromising the other funds in the system after they had been moved.
The decisive actions taken by the company are what saved the market from taking another deeper dive once the news started to pour out about the breach. Usually, any time there is a big hack it makes people incredibly uneasy and usually signals them to take their funds out of the market. This time, however, Bithumb had a contingency plan. Having stored up a significant amount of reserve funds in the exchange accounts, the company immediately paid back any investor money that had been stolen.
Charlie Lee was on Fast Money explaining that the strong fundamentals of bitcoin are what in fact saved the coin in the face of these recent security breaches on exchange platforms. He also mentioned the fears people have had about cryptocurrency fundamentals with coins like TetherUSD which is meant to be pegged directly to the price of the US Dollar but has shown some evidence that there may have been manipulation.
“The past few years people have been scared that Tether has been printing their Tether coins out of thin air and buying bitcoin with it, which might be the cause of last year’s run-up. And if they actually do have the USD backing that means that the run-up is created by real demand and not fake demand. That’s really good news.”
He compared it to how if a bank had gold stolen from its vault, the value of the gold would not change drastically after it has been stolen. And while the price of bitcoin did drop a few hundred dollars in the hours following the hack, it has now regained the lost ground and has progressed even closer to the $7,000 mark.