After hackers stole $65 million worth of bitcoin, the value of the entire digital currency plunged dramatically and then recovered. The currency sunk in value by 15 percent after the cyber attack but had changed little from its starting point by this morning.
According to Hong Kong-based exchange Bitfinex, it halted all trading on Tuesday including all withdrawals and deposits when it discovered the security breach. The exchange confirmed its continued investigation into the details of the attack and stated that it was cooperating with law enforcement officials. It also acknowledged that some portion of the stolen bitcoins was taken directly from its users.
“Yes, it is a large breach,” confirmed Fred Ehrsam, co-founder of cryptocurrency wallet and trading platform Coinbase. “Bitfinex is a large exchange, so it is a significant short-term event, although Bitcoin has shown its resiliency to these sorts of events in the past.”
In a message to major news sources on Wednesday morning, Bitfinex confirmed that hackers stole 119,756 bitcoin from the trading platform, an amount that comes out to about $65 million. Trading was immediately brought to a halt in all digital currencies including ethereum and losses were limited only to bitcoin. U.S. dollar deposits were not impacted.
“We will look at various options to address customer losses later in the investigation,” wrote Bitfinex in a blog post following the attack. “We ask for the community’s patience as we unravel the causes and consequences of this breach.”
The Hong Kong exchange attacked was the largest for U.S. dollar-denominated transactions over the past month while Chinese exchange OKCoin was the alrgest overall platform for trading in the digital currency.
The price drop in bitcoin was similar to what occurred after Tokyo-based Mt. Gox was hacked in Februaru 2014 and forced to file for bankruptcy. At the time of the attack, Mt. Gox was the largest bitcoin exchange platform in the world. Bitcoin prices plunged by 30 percent that month, and their eventual recovery constituted one of the nine lives that the controversial online currency seems to have.
Bitfinex recently partnered with Palo Alto-based BitGo, which uses multiple-signature security to store user deposits online, making it possible for faster confirmation and withdrawals on bitcoin exchanges.
“Since we now enforce multi-institutional second factor authentication (Bitfinex will be the first factor and BitGo the second factor), attackers are required to go compromise both institutions before getting funds,” Bitfinex disclosed on its support page after announcing the partnership last year.
“To date, BitGo’s investigation has found no evidence of any compromise of its servers or services,” confirmed company spokesman Joe Volat. “We believe that multi-sign security technology on which BitGo’s systems are based was not affected.”
The company generally supplies security to other bitcoin exchanges, but according to Toronto-based active bitcoin code contributor Peter Todd, “Bitfinex is in lockdown/investigation mode, so we’re not going to know anything for sure for a few days.”
Whether that missing $65 million ever turns up again remains to be seen.