Despite Cyber Security Issues, Cryptocurrency Analysts Remain PositiveDate Written: June 22 2018 Written By: Samantha Joule Fow
Until this week, June had been a hopeful month for crypto investors. Despite trading at relatively low levels of their ranges, the top 5 cryptocurrencies had experienced unprecedented stability recently.
Due to the fact that many crypto traders remain highly speculative, virtual currency markets are famously reactive to the news cycle. Given that cybercriminals made off with over $65 million in virtual currencies after breaking into two major Asian exchanges within just days of each other, the news this week was not good.
(Another) South Korean Exchange is Hacked
The cryptocurrency revolution has been good to a lot of people. From entrepreneurs looking to throw off the shackles of traditional venture capitalists to enterprising young techies who bought Bitcoin back when it was still just a fringe online phenomenon, virtual currency has helped a lot of people generate meaningful wealth. Unfortunately, however, hackers and cybercriminals are also at the top of the list of beneficiaries.
On June 11, South Korean cryptocurrency exchange Coinrail announced that it had been hacked over the prior weekend. Using the euphemism “cyber-intrusion,” the exchange stated that it had lost a total of $37.2 million in crypto coins. It had, however, been able to move the majority of its assets into cold storage relatively quickly to prevent further losses.
The markets didn’t react much to this bad news, although it certainly didn’t help. Bitcoin was already in the midst of a market correction that dragged its price down from around $7,500 on June 9th to under $6,400 on June 13th. Now that a second – and larger – South Korean exchange has been attacked, it appears that this downward trend may continue, at least in the short run.
Bithumb, a top-ten cryptocurrency exchange by global trading volume, was hacked just a week after the Coinrail theft. The take was similar – a cool $32 million in cryptocurrency – and Bithumb has already announced its intention to refund investors’ losses with coins maintained in cold storage.
Regardless, many investors are bailing out of the cryptocurrency markets in response to this double-whammy. At the time of writing, Bitcoin was trading near its 30-day low around $6,300, and there’s no telling how far this bearish trend will go.
The Market Responds to Crypto Security Issues
This year has been a tough one for cryptocurrency investors. Overall, markets are down around 50% YTD and 2018 kicked off with a record-breaking $500 million theft from popular Japanese exchange Coincheck. So, even though the loss of another $32 million is not a make-or-break moment for the crypto markets, we may be on the brink of a sell of in response to larger concerns about cryptocurrency’s security issues in general.
Most analysts, however, seem relatively unphased by the recent thefts. Ryan Rabaglia, head cryptocurrency trader at Octagon Strategy Ltd. in Hong Kong reflected this positive sentiment in Fortune earlier this week. “The market has sort of become a bit more battle-hardened,” he explained, “It can weather the storm on these negative reports.”
Goldman Sachs COO David Solomon also confirmed to Bloomberg this week that the financial giant will soon be trading cryptocurrencies in addition to its current activities in the Bitcoin futures market. In other words, while some investors are panic-selling in response to bad news cycles, more disciplined professionals are looking at more long-term positions. This positive outlook on the crypto markets foreshadows good things in a new market that is still trying to get its legs under it.