In a security breach reminiscent of the Mt. Gox 2014 case, hackers have stolen nearly $70 million worth of bitcoin from Hong Kong-based exchange Bitifinex, sending shares for the digital currency plunging.
Bitifinex is one of the largest exchanges for bitcoin in the world and it halted trading after the theft was discovered. Shares dipped 6 percent versus the greenback as of 3pm on Wednesday in the Tokyo afternoon session, with its two day slump at 14 percent.
Bitifinex said in a brief statement, which acknowledged that bitcoins were stolen from its users, that they were “thoroughly investigating the breach and will release more details as and when they become clear.”
“In the coming week we will look carefully at the situation and attempt to address the issue of user losses,” said the exchange on their blog. “We beg for patience in the bitcoin community as we investigate the breach.”
Bitfinex confirmed that hackers stole nearly 120,000 bitcoin, equivalent to around $70 million at the current exchange rate. “Although we stopped trading on all our digital currencies, the only one to suffer losses was bitcoin,” they added.
“It’s a huge breach,” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management in a phone interview yesterday.
“We’ve seen in the past with similar events that bitcoin is fairly resilient however. This can be devastating in the short term and we all remember Mt. Gox filing for bankruptcy after a similar theft caused a 25 percent drop in bitcoin prices. But fairly quickly it bounced back,” Lane added.
The result of the current incident has been almost $2 billion being wiped from the currency’s market capitalization, according to data from CoinDesk, a news site specializing in bitcoin and digital currencies.
The latest theft comes only a year after Bitfinex announced it was hiring Palo Alto-based BitGo to handle its upgraded security. BitGo has an intricate multi-layer security protocol used to safely store deposits online.
After the new security partnership was made public, Bitifinex said, “It’s very difficult for attackers to get through as two separate organizations need to be compromised in order to gain access.”
Other exchanges, for example OKCoin, choose to store most of its funds offline. Only time will tell if Bitifinex decide to go down that route in the future. Judging by the magnitude of the latest attack, it may be something they are likely to consider.
