The End Of Bitcoin As We Know It?

Jeff Horowitz

Bitfinex, one of the largest Bitcoin exchange,  has just been hacked, losing about USD63 million worth in Bitcoin. Bitcoin is a digital currency and a payment system invented by Satoshi Nakamoto.

Data monitored through Bloomberg shows Bitcoin slumped 5.3 percent against the dollar as of 10:17 a.m. on Wednesday in Tokyo, bringing its two-day drop to 13 percent. Prices also sank 6.2 percent on Monday, although it was not clear if that initial move was related to the hack.

Hong Kong-based exchange Bitfinex said on Tuesday that it halted trading, withdrawals and deposits after discovering the security breach. The exchange said it was still investigating details and cooperating with law enforcement, but acknowledged that some bitcoin have been stolen from its users.

 “Yes – it is a large breach,” Fred Ehrsam, co-founder of Coinbase, a cryptocurrency wallet and trading platform, wrote in an e-mail. “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.”

Bitfinex confirmed in a message to Bloomber on Wednesday that the hackers took 119,756 bitcoin, or about $65 million at current prices. More than $1.5 billion has been wiped out from bitcoin’s market capitalization this week, according to research from CoinDesk.

“We will look at various options to address customer losses later in the investigation,” Bitfinex wrote in a blog post. “We ask for the community’s patience as we unravel the causes and consequences of this breach.”

This similar breach led to the collapse of Mt.Gox. In the month of February 2014, the Mt.Gox company suspended trading, closed its website and exchange service, and filed for a form of bankruptcy protection from creditors called minji saisei, or civil rehabilitation, to allow courts to seek a buyer.

This development is yet another big blow to Bitcoin, a digital currency that was banked on to either replace or compete with traditional currency.