The $30m Bithumb hack announced on Twitter on June 20, 2018, affected the cryptocurrency markets, but prices held reasonably firm. News of an exchange hack normally sees a sharp fall in prices for all cryptocurrencies, but this time, it was a more modest fall of just 3%. Before the hack, bitcoin was trading at $6,750 on Binance, the world’s largest crypto exchange. Bitcoin declined to $6,550 when the news broke around 1.15 am UTC, but then saw a slight rally to $6,600.
The decline was probably mitigated due to the prompt response of Bithumb and their confirmation that they would cover the losses from their funds. Bithumb has annual profits of around $300 million, so the Bithumb hack shouldn’t threaten their long-term survival. Questions will be asked as to how the hack was carried out and what measures they have taken to prevent future losses.
Crypto markets in Europe and the USA are not aware of the hack at the time of writing this article, and there could be a further sell-off during the day. Many trading systems send out alerts to traders when markets fall, and much of the trading is automated these days. On this basis, the expectation is that the Bithumb hack is already priced into bitcoin on most exchanges.
Some pundits blamed the Coinrail hack on the 11% “bloody Sunday” decline where hackers made off with around $40 million. Coinrail is a much smaller exchange than Bithumb, and the losses will have a much more significant effect on the smaller South Korean exchange. The modest decline seen from the Bithumb hack seems to indicate that an exchange hack of $30 to $40 million would not usually push prices down by more than 10%.
Price movements can be exaggerated though depending on the underlying sentiment of the market. With the Coinrail incident, prices had been falling steadily before the hack whereas prices had just started to move up in the days before the Bithumb hack.
Financial analyst, smartphone app designer, technical writer, and crypto enthusiast. Blockchain verified graduate of MOOC 9, DFIN-511: Introduction to Digital Currencies, run by the University of Nicosia.