The Phaserl


Bitcoin Plunges Nearly 20% as Exchange Hack Amplifies Price Decline

[Ed. Note: At the time of posting this piece at 9:50 pm CST the price of Bitcoin had recovered from the lows, hitting $540 USD]

from Coin Desk:

The price of bitcoin fell sharply today exacerbating an already ongoing decline as global market participants reacted to news that one of the largest digital currency exchanges had been hacked.

Earlier this afternoon, Hong Kong-based exchange Bitfinex halted trading after discovering a security breach, which included taking its website offline and pausing all withdrawals and deposits. Representatives from the exchange told CoinDesk engineers were seeking to uncover issues at press time, though the company had confirmed roughly 120,000 BTC (more than $60m) was lost or stolen via social media.

In response, bitcoin prices fell to $560.16 by 19:30 UTC, $530 by 23:30 and $480 at press time, CoinDesk USD Bitcoin Price Index (BPI) data reveals.

This price was roughly 20% lower than the day’s opening of $607.37 and 27% below the high of $658.28 reached on Saturday, 30th July, when the digital currency began pushing lower.

Arthur Hayes, CEO of bitcoin leverage trading firm BitMEX, emphasized that this event had a clear and measurable effect on bitcoin prices.

He told CoinDesk:

“A high profile hack is not good for sentiment and curtails the ability for market makers to keep an orderly market.”

Market observer and trader Jacob Eliosoff provided similar input, telling CoinDesk that the event had sparked a new wave of uncertainty.

“The big question will be how much was stolen and whether Bitfinex will make customers whole,” he said.

Market participants traded more than 600,000 BTC via Bitfinex during the 30 days through 2nd August, Bitcoinity data reveals. This figure represented represented 1.6% of the more than 39m BTC transacted through various exchanges during the 30-day period.

The halving’s impact

However, the price decline does not appear to be the sole result of the issues at Bitfinex.

Bitcoin prices experienced a gradual, downward movement over the course of several days, with market observers pointing to the halving of rewards on the bitcoin network as the cause. This event – which saw a 50% reduction in the mining subsidy on the network – generated significant visibility when it took place 9th July.

At the time, there was no major change in bitcoin prices, despite expectations that such a move may have been probable.

“It looks like traders got a bit ahead of themselves thinking that the price would go in a straight line after the halving,” said analyst Tuur Demeester. “The halving is real and will have real effects.”

One such effect is profit taking. Petar Zivkovksi, director of operations for full-service bitcoin trading platform Whaleclub, spoke to this development, noting his belief this trend was “in full effect” after the halving.

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