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Bitcoin Tumbled Following South Korean Exchange Hack

Bitcoin Tumbled Following South Korean Exchange Hack 101
Source: iStock/Sitade

The price of bitcoin fell sharply on Sunday and early Monday morning after Coinrail, South Korea’s 7th biggest exchange said it was hacked, possibly to the tune of over USD 37.3 million.

According to data from Coinbase, bitcoin dropped 10% to around USD 6,770 – the lowest level for the cryptocurrency since April 12. On Monday morning, the price was still hovering below the USD 6,800 level, after a slight increase during the early hours of the Asian trading session.

The sell-off on Sunday followed news reports about a hack at Coinrail. The exchange said it was the victim of a “dawn raid” on its wallets on June 10, with hackers active on its system for up to 40 minutes, where they succeeded in accessing Pundi X (NPXS), Aston (ATX) and NPER funds. Some media reports claim Tron funds were also affected, and that the total losses may actually exceed USD 40 million, but the company has not yet issued confirmation.

The company, which is the seventh biggest in the country by trading volume, says it has suspended all operations, and has safeguarded 70% of its customers’ funds. Also, Coinrail says it has successfully “frozen or recalled” some 66% of the hacked funds and stated that all of its assets are now in a cold wallet, where they will remain until the company’s network “has been stabilized.”

Per a company statement, Coinrail also said it was working in close collaboration with the police. While most media sources in South Korea are claiming that over USD 37 million was taken, Coinrail is yet to confirm or deny these estimates, stating, “The exact extent of the damage is currently being calculated, and this may take some time.”

The company said that it was unable to reveal many of the details of the hack as doing so “may interfere with the police investigation,” but added that it was in close talks with the coins’ developers.

Joongang Ilbo points out that Coinrail had run into trouble with the Fair Trade Commission this year over clauses in its terms and conditions that appeared to absolve the company of blame in the event of “damages.” As reported previously on Cryptonews.com, a total of 12 exchanges (of which Coinrail was one) were ordered to make significant changes to “unfair” customer policies in April.

The FTC claimed that exchanges’ terms “did not exempt them from liability” in the event of the loss or theft of customer funds.

Exchange hackings have become a major issue for the cryptocurrency market in recent years, and continues to shake the market every time they occur. It is estimated that since 2014, hackings on exchanges have cost investors at least USD 1.4 billion.

However, according to Mati Greenspan, Senior Market Analyst at eToro, a social trading platform, a deeper analysis reveals that the media may be attributing too much of this plunge to the CoinRail hack. He stressed that the big drop came more than 15 hours after the news was fully digested by the markets: "The industry has certainly seen much bigger hacks before and other than a technical price level, this doesn't change much for the path of the industry over the next five years."

"At the moment, we know that the infrastructure is still under construction, and some very big investors stand ready to enter the market. However, they will most likely wait until an upswing to join in. We got a taste of that in mid-April when FOMO hit the market like a ton of bricks but in the end wasn't strong enough to change the trend just yet," Greenspan said.

CFTC Investigating Bitcoin Price Manipulation

Other cryptocurrencies such as ethereum, ripple XRP and bitcoin cash all dropped more than 11 percent on Sunday.

The sharp declines in crypto prices on Sunday also followed news that the US regulator known as the Commodity Futures Trading Commission (CFTC) has launched an investigation into potential price manipulation at four major cryptocurrency exchanges: Bitstamp, Coinbase, itBit and Kraken.

According to news reports, the CFTC has subpoenaed the exchanges to hand over sensitive trading data to help in the investigation.

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