UPDATE: Bitgo has announced that no customer coins involved in the Bitfinex hack were on the Bitgo platform, all funds on Bitgo are safe. All coins involved were on the Bitfinex side.
A panic sell-off in the wake of the announcement form Bitfinex regarding a security breach brought the price of bitcoin crashing down to earth hitting $471.61 on the dinbits index.
It has now been confirmed that less than 120 thousand bitcoin, valued around $57 million USD were lost. Certainly a heavy hit, but overall a relatively small loss.
Although that is seemingly a large amount of money, in the grand scheme of things it is relatively low for bitcoin overall and even for an exchange the size of Bitfinex. To put that into perspective that is less than 48 hours of trading volume on Bitfinex where the average over the last 24 hours around $30 million USD.
It would account for less than a percent of the overall market cap at about 0.006%.
From a bitcoin perspective and at an exchange the size of Bitfinex ... this is really nothing. One of those "it'll leave a mark but won't kill you" hits.
This is not to say Bitfinex is happy about this. It can be expected for heads to roll and law enforcement worldwide to begin the manhunt and like most hacks, will undoubtedly result in some kind of inside job or a platform exploit. However, to be clear.
THE BLOCKCHAIN WAS NOT HACKED
BITCOIN WAS NOT HACKED
The blockchain has never been hacked and remains the safest place on earth to store money. Bitfinex was hacked and from the sound of the volume, likely just a hot wallet for liquid exchange volumes. Even if you were to include the company in a list all institutions of the world it would still be SWIFT and the Federal Reserve Bank leading the category of funds lost in 2016 with upwards of $100 million USD hacked. Bitfinex is not the blockchain and no assets from the blockchain have been compromised. It is likely that nothing from Bitfinex cold wallets have been lost either.
How Big is Small?
Over the past 30 days trading volume on Bitfinex was well over $400 million USD. In the 24 hours prior to the hack nearly have of the volume of the entire amount lost in the hack was traded on Bitfinex ($30 million USD). With each trade there is a fee and with each fee there is profit for Bitfinex. They are one of the largest digital asset exchanges on earth and $60 million is no drop in the bucket, but hardly anything that is going to cause much of a long-term issue for the company.
Let's keep in mind that Mt Gox was hacked several times losing thousands of bitcoins on top of a $75 million dollar lawsuit and another $5 million funds seized by the United States until ultimately getting the final nail through the heart when upwards of $500 million was sucked out of the exchange as it imploded. When you factor in the value of bitcoin along the way with the size of the attacks each time you can see the company was always operating in a bit of a wounded mode.
A much smaller exchange, Bitstamp, suffered a $5+ million attack last year (announced the hack anyway, it actually took place in 2014) of which it absorbed and is still going strong. This is certainly a sting for Bitfinex but nothing they won't survive and as far as bitcoin goes there's more than enough other players to pick up the slack short-term.
Hot Wallet old Wallet
Hot wallets and cold wallets both store bitcoin but in different ways. Hot wallets are "live" accessible wallets storing bitcoins for immediate use such as on the Bitfinex exchange. Cold wallets are offline and cannot be accessed.
Cold wallets are where the majority assets of a companies holdings including those on behalf of its customers are held. This event is the exact reason why this is so. Another Mt Gox this was not.
This may bite Bitfinex in the ass and sting a bit but it will far from do anything more than be slightly annoying for a few days while they sort things out of work with law enforcement. We'll continue to monitor the situation over the next several hours and upcoming days for updates.
Bitcoin Rises
Since bottoming out at $471.61 just a few hours ago, bitcoin has been on the rise shooting up nearly $70 to its current rate of $537.14 where many are taking advantage of the panic selling and playing the huge margins.
The gap is closing as the price is quickly recovering. However, there appears to be some time left to take advantage of the low price on the rise with bitcoin still down around $100 from yesterdays spot.
Report by dinbits
Image source: dinbits staff
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