Red Number Day: The Shadow of Mt Gox Strikes, Bitcoin Price Tanks
In what seems to be an almost never ending chain of FUD, today turned out to be another serious "red number day" for cryptocurrency.
A few culprits have been accused of causing most of the dips, the biggest of which is actions made by the Mt Gox trustee in Japan. In this article, we're going to review some of the FUD going on in crypto today, as we try to figure out which ones are causing the slide.
The Binance "hack"
Image via Fotolia
A number of users on the Binance exchange were very surprised to see that their accounts had suddenly sold all of their non-bitcoin cryptocurrencies for bitcoin, and then promptly place overpriced orders for a little-known altcoin called VIA.
It was quickly revealed that the attack was a highly coordinated one that took several months to arrange. The hackers made use of a "homograph" technique in order to lure unsuspecting users into entering their credentials into the fake site.
For those who don't know, a homograph technique is one where look-alike characters are used. In this case, letters that, at first glance, appeared to spell the correct address were in fact ones that had very slight accents on them. And so to a computer, it was an entirely different address.
Unfortunately for the culprits, it appears that they not only failed to get any earnings out of the attempt, but they may in fact have lost money. The Binance exchange employs automatic threat detection software. That software spotted the bad accounts and locked them down immediately.
So not only can the hackers not get any funds out, but any funds they spent purchasing VIA in an attempt to sell it off at a massively inflated price is also permanently locked.
Regardless of the somewhat happy outcome, the FUD spread quickly, and news of the hack may have been partly responsible for prices dipping.
Japanese government goes after exchanges
According to a Tokyo-based Bloomberg tech reporter, the Japanese FSA is starting something of a crackdown on cryptocurrency.
In a tweet posted on March 7, reporter Yuji Nakamura noted that two exchanges will be shut down temporarily, four will be penalized, and two will have their license applications withdrawn. Further, exchange Coincheck cannot return any funds until they have undergone more audits.
This crackdown appears to be a response to both recent hacks that have occurred on Japanese exchanges, as well as for two of the platforms failing to meet AML and KY see rules.
Any FUD that hits Japan will inevitably hit the world at large. This is because the Japanese yen represents as much as 50% of all global cryptocurrency trading.
The never ending saga of Mt Gox
Image via Wikipedia
This particular saga is one that is long and frustrating. If you like more information about where this all started, we suggest you read our take on the Mt. Gox hack.
Following what has become the single biggest cryptocurrency hack in history, the Mt Gox fortune is now held by a trustee (lawyer) in Japan where the exchange was registered. The trustee has been overseeing a incredible horde of hundreds of thousands of bitcoin, and now an equal number of Bitcoin Cash.
Based on what can be seen on the bitcoin blockchain, and also according to a report released by the trustee themselves, a selloff has occurred and a large amount of bitcoin and Bitcoin Cash have been sold, some of which at comparatively low prices. In the report, the trustee notes:
Between the 9th creditors’ meeting and this creditors’ meeting, with the permission of the court, I sold a certain amount of BTC and bitcoin cash (“BCC”) that belonged to the bankruptcy estate.
Whenever a massive selloff occurs, prices usually dip in response because there's so much supply on the market looking for buyers. In this case, the amount being sold all at once is sort of unprecedented. As many altcoin prices are tied to bitcoin, prices for most crypto assets dropped across the board today.
Typically by 10% or more. Ethereum in particular has been hit quite hard. It went from an all-time high of around $1400 to just over $600 today, meaning it dropped by more than half in value since January.
One significant weakness that the cryptocurrency world has is its dependence on bitcoin as an underlying asset. Whenever bitcoin drops, everything drops in response. At least, when it comes to the comparative fiat values of the altcoins.
It is inevitable that more dips of this sort will continue to occur for at least the next few years. This is because many people still do not understand the true nature of bitcoin and cryptocurrency. And so, they will likely continue to overreact to these sorts of announcements by panic selling.
It is only when cryptocurrencies at large have had more than enough time to mature that these sorts of spikes will be lessened.
Featured Image via Business Insider
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.