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Bithumb Hack Prevents Corrective Cryptocurrency Rally, Market Drops

Last Updated March 4, 2021 5:09 PM
Joseph Young
Last Updated March 4, 2021 5:09 PM

South Korea’s biggest cryptocurrency exchange Bithumb experienced a hacking attack that led to a $30 million loss on June 20, leading the cryptocurrency market to drop by $6 billion within hours.

Major cryptocurrencies such as Bitcoin, Ethereum, Ripple, and Bitcoin Cash, which successfully picked up some momentum throughout June 17 to 19, ended their corrective rallies and have fallen by around 1 percent over the past few hours.

Tokens including Ardor, Ethos, Polymath, and Aion have continued their downward trend against both Bitcoin and the US dollar, triggered by the Bithumb hack and increasing negativity surrounding the cryptocurrency market of South Korea.

Uncomparable to CoinRail Hack

Earlier this month, CCN.com reported that CoinRail, a top 10 cryptocurrency exchange in South Korea, was hacked. The exchange lost over $40 million in user funds and due to the small size of its operations, the company had to endure a restructuring to compensate users.

The size of the CoinRail hack was larger than the latest Bithumb hack, given that Bithumb only lost $30 million in its recent attack. But, the significance of the Bithumb hack is not comparable to the CoinRail security breach, as there exists a clear and evident difference between the 10th largest exchange in South Korea and the biggest trading platform in the country falling victim to a major attack.

In January, Japan-based Coincheck, which was once the biggest cryptocurrency trading platform in South Korea, suffered a $530 million hacking attack, the largest breach in the history of the cryptocurrency market. Coincheck’s hack couldn’t be limited to a small portion of the exchange’s funds because absurdly, the company held all of its NEM holdings in a hot wallet.

Fortunately, Bithumb has been able to limit its breach to $30 million because the vast majority of its holdings were stored in a cold wallet or an offline cryptocurrency wallet that is not hackable. But, if Bithumb had stored a significant chunk of its holdings in a hot wallet, the breach could have gotten a lot worse.

The recent Bithumb hacking attack dealt a major blow to the cryptocurrency market of South Korea because local investors have only started to recover from the police raid on UPbit headquarters and the controversial listing of Popcorn Token by Bithumb that led authorities to investigate the exchange last month.

At a phase in which the local cryptocurrency exchange market of South Korea started to regain the trust of the public, Bithumb suffered a security breach, for the third time in 12 months. Throughout June, local investors were outraged by the numerous investigations into Bithumb and UPbit, and were having difficulty investing in the cryptocurrency market due to the instability in the two platforms.

Where Does the Market Go Next?

Technically, Bitcoin has been on a positive trend as of late and was on track to reaching $7,000 after rebounding to $6,700 from a weekly low of $6,200. But, the latest Bithumb hacking attack could be enough to reverse the trend.

Featured image from Shutterstock.