Bitcoin Price Drops In Response To $65M Hack

After an early summer with solid gains, bitcoin’s price has been plummeting following the hack of Bitfinex – a Hong Kong-based bitcoin exchange.

According to sources within Bitfinex, all trading and deposits have been put on hold while it investigates the full extent of the hacking and theft which have allegedly caused $65 million worth of the virtual currency to virtually disappear into thin air.

Bitcoin’s trading price dropped by about 20 percent in trading on international exchanges – though as of mid-day in Hong Kong, prices had recovered by about half.

Zane Tackett, Bitfinex’s director of community and product development, did not immediately respond to requests for comment from The New York Times. In a Reddit posting he confirmed that 119,756 bitcoins had been stolen.

The pre-hack value of those coins was around $72 million – but the resultant slump in price has pushed down the value of the bounty. The exchange has publicly confirmed that it will settle hacked accounts at pre-hack prices.

“As we account for individualized customer losses, we may need to settle open margin positions, associated financing, and/or collateral affected by the breach,” Bitfinex said in the post. It added that customers’ losses would be addressed later.

This is neither the first, nor the biggest, hack of bitcoin in recent memory. Tokyo-based Mt. Gox lost several hundred thousand bitcoin at the top of its value (translating into over $100 million lost) and in June, $50 million of Ether – a competing digital currency – was also boosted by hackers. Digital currency skeptics note that these frequent high dollar breaches signal some underlying security problems that will likely hamper bitcoin’s evolving into mainstream currency status.

Jack Liu, chief strategy officer at OKCoin, a large digital currency exchange, says he is not concerned about his site’s security – but he is concerned to see best practices adopted.

“We care about the health of the ecosystem,” he said, although he emphasized that nobody should be dictating how bitcoins are secured. “Hackers are only getting better and so adoption of the same solution may not be the safest for the industry.”

The blockchain ledger itself has found more acceptance among mainstream banks – who see it as a potentially valuable tool to the future of international funds transfers. Bitcoin’s status as a currency used widely is somewhat less certain – probably more so today in light of the recent hack.

Bitfinex said the theft has been reported to law enforcement.