The fallout from the Bitfinex hack, which cost the digital exchange $72 million, has customers losing 36 percent of the assets that they held on the digital platform. Bitfinex has attempted to appease those affected by offering tokens of credit that can be redeemed by Bitfinex or its parent company, iFinex.
Consumer confidence will not be bolstered by the news that no one seems to have any idea of the techniques used by the hackers or, at least, Bitfinex and other experts are not admitting that there is a weak spot in blockchain and the decentralized ledger approach.
Toil And Trouble With Bitcoin Price
The Bitfinex hack saw the price of bitcoin fall to $480, but optimism has brought the price back up to close to $580, according to Coin Desk USD Bitcoin Price Index. Trading on Bitfinex resumed on Aug. 10, and theories abounded concerning the 20 percent price drop following the hack and the subsequent rebound. Analysts were drawing comparisons with the Bitfinex price drop and one that occurred when Mike Hearn, a key bitcoin developer, abandoned the project.
The chairman of EAM, Tim Enneking, optimistically stated that the Bitfinex hack did not change the perceived value of the currency among traders and that he expects the price to approach $800 in the recovery period. Petar Zivkovski, director of operations for Whaleclub, cited “mean reversion,” meaning that the price plunge was caused by margin calls for long positions held by those who were surprised by the hack and had little time to react.
Bitfinex's decision not to file for bankruptcy and its expected reopening seems to be supporting bitcoin prices. The CEO of bitcoin leverage trading platform BitMEX, Arthur Hayes predicted, “Once they (Bitfinex) allow trading, many traders will attempt to purchase bitcoin with any dollars they have on the platform and withdraw," which he expected to push up the price on Bitfinex and in the rest of the market.
According to a Bitfinex statement, “We have added additional platform and infrastructure security checks; regenerated all encrypted services, including wallets, security tokens, and passwords; moved funds to multisig cold storage; re-evaluated all third-party integrations; performed a comprehensive system audit in order to identify vulnerabilities and rebuilt our entire platform on new infrastructure.”
When trading resumed, the value of the tokens distributed to Bitfinex traders rose in value from $0.10 to $0.40, exciting analysts and confounding others such as Hayes. He told CoinDesk, "Bitfinex explicitly said it has no obligations to ever pay back a dime to BFX token holders.” The exchange had announced on Aug. 6 that the tokens would be available for trade until Bitfinex either paid back its accountholders or provided them with shares of iFinex.
Some accused Bitfinex of distributing the first debt-based cryptocurrency, and others suggested that Bitfinex was driving up the market by in order to buy back the equity at a lower value.
Bitcoin 'Hacker' Program To Attract Developers
Other news for bitcoin includes a “hacker residency” program run by Chaincode Labs that is to begin in the fall in New York City. The program will last for four weeks, and participants will explore bitcoin software interactively rather than learning online. The goal is to increase the number of low-level protocol developers and attract potential developers.
US Government To Auction Off Seized Bitcoin
The U.S. government is about to auction off 2,700 bitcoins that it acquired following the shutdown of Silk Road back in October 2013. It will be interesting to see what the coins go for on Aug. 22 bearing in mind that the government is valuing them at around $593. This is the fifth auction conducted by the U.S. Marshals Service of seized bitcoin since June 2014.
Apple Tainting Bitcoin’s 'Stellar'(?) Reputation
Bitcoin can’t escape its notoriety and nefarious connections, which were highlighted by Apple. Apple is cracking down on counterfeit bitcoin wallets that are appearing in the App Store. In the last week, at least 10 instances of fake coins were reported by Apple Insider. Fake coins can steal thousands of dollars in bitcoins from other users.
The apps pose as legitimate bitcoin wallets such as BitGo and Coinbase using copycat source code. One of the illegitimate apps reportedly stole $20,000 from customers and around $10,000 from just one victim. Apple could be partly at fault for not screening out the apps, but bitcoin developers have been in the habit of making source code public to increase transparency making it easier for hackers to copy the apps.
Now we know the reason for the New York hacker residency program. Bitcoin needs to up come up with new source code.
Bitcoin To Be Worth $2,000 By 2017
Kim Dotcom, who is responsible for the file-sharing services MegaUpload and MEGA.co.nz and rumored to host pirated content, has predicted a value of $2,000 per bitcoin by 2017. This implies great things for his planned Bitcache service, which merges bitcoin with MegaUpload.
Oh – so it’s 2017 now? It was supposed to hit $2,000 by the end of Feb 2014. Then in 2015, it was reported that each bitcoin would be worth $12 million by the end of 2019, and in 2015, it was projected to reach $1 million in a few years.
According to The Merkle, the proposed platform could have a major impact on bitcoin value, as could the upcoming government auctions. But if bitcoin continues to suffer from cyberattacks, it might be better deploying its New York hacker graduates to security coding rather than finding ways to integrate digital currency transactions with a file-sharing service.