An Evolving Narrative on How Hacking Affects the Market
In the middle of restorative rally, news broke this week that the South Korean exchange Bithumb had been hacked for $30 million. Obviously, this halted the rally and around$10 billion immediately exited the cryptocurrencies market worldwide in fear. This was the second hack on a South Korean exchange in the last two weeks and Bitcoin dropped to $6,600, but it was the frequency of the cyber attacks that seemed to really be hurting the entire market. Bitcoin prices fell earlier this month after another South Korean cryptocurrency called Coinrail said it lost 70% of its digital assets from a “cyber intrusion.” Investors have lost over $1.4 billion from exchange hacks globally since 2014, according to an analysis by The Wall Street Journal.
Granted, many traders in Asia have moved their wallets onto Upbit, but Bithumb was once a monster in the exchange world trading with the highest volume of any exchange for the longest time – it now is the sixth largest. The company has halted all deposits and withdrawals, so that it can compensate the losses for all customers.
However, in spite of this grim news, Bitcoin and its hodlers have not turned morose. The negative narrative has dissipated showing resiliency. Short-term bullish technicals are alight on BTC – as it trades above the 50-candle moving average – demonstrating a reversal pattern after a rounding bottom.
All that said, it is still possible for BTC to drop below the $6,000 mark if a large sell-off is recorded in the upcoming days, below the $6,800 region. If BTC rebounds to $7,000 and breaks a key resistance level at that region, it is possible for BTC to initiate a mid-term rally.
One reason why Bitcoin might be rebounding is that Ripple (XRP) might have been the target in the hack. According to Coindesk, Bithumb accounted for 10 percent of the global trading volume of XRP over the last 24 hours, with a total of $32 million-worth changing hands.
The other reason for BTC’s bounceback is the fact that the industry is starting to strengthen as customers are being repaid in full. On a previous hack, last year, Bithumb only paid back investors $85 each. So, the level of risk is being reduced as more and more investors flood the cryptocurrency space.
Yet, prior to the hack, the Korean Financial Intelligence Unit (KFIU) announced it would regulate the crypto markets to protect investors. “Under current regulations, there are clear limitations in preventing money laundering on crypto exchanges because the only way authorities can spot suspicious transactions is through banks. If the bill of lawmaker Jae Yoon-kyung from the Democratic Party of Korea passes, local authorities will be able to impose identical regulations on crypto exchanges that are implemented on commercial banks,” a KFIU spokesperson said.