Crypto Rally Pauses as Details of $40 Million Binance Hack Emerge
The crypto market rally paused on Wednesday after it came to light that Binance, the world’s largest digital asset exchange by volume, experienced a $40 million security breach. The perpetrators made off with roughly 7,000 bitcoin (BTC) in a coordinated attack targeting Binance’s hot wallet.
Binance Hack: Update
As CCN reported, Binance experienced a high-profile security breach on Tuesday after hackers were able to obtain a large number of API keys and two-factor authentication codes, which gave them access to user accounts. From there, the “hackers used a variety of techniques, including phishing, viruses and other attacks,” Binance said in a statement. This resulted in the orchestrated theft of 7,000 BTC, which is equivalent to around $40 million at yesterday’s prices.
CEO Changpeng Zhao (CZ) has since taken to Twitter to update users on the investigation and mitigation plan. He assured users that trading, deposits and withdrawals will not be affected as Binance performed some “unscheduled server maintenance…”
Have to perform some unscheduled server maintenance that will impact deposits and withdrawals for a couple hours. No need to FUD. Funds are #safu.
— CZ Binance (@cz_binance) May 7, 2019
Apparently, “safu” is crypto slang for safe. Basically, CZ says Binance has no liquidity issues and does not require any financial help.
In the wake of the attack, Tron CEO Justin Sun offered to personally make up for Binance’s shortfall by depositing “7,000 BTC worth USDT” into the exchange.
— Justin Sun (@justinsuntron) May 8, 2019
CZ thanked Sun for the support but said it was unnecessary.
Thanks for the support, really appreciate it. But currently no need. We will cover the loss from the #SAFU fund, there is enough. We are hurt, but not broke.
We are working hard to resolve the issue, so that everyone can deposit and withdrawal again. Will take some time. https://t.co/0j4J0fk99W
— CZ Binance (@cz_binance) May 8, 2019
In a series of Twitter posts on Wednesday, CZ admitted that the Hackers were able to exploit “certain weak points” in the Binance architecture. Looking at the positive side, CZ said Binance “could “revenge” the hackers by “moving” the fees to miners,” which would deter future hacking attempts.
cons: 1 we may damage credibility of BTC, 2 we may cause a split in both the bitcoin network and community. Both of these damages seems to out-weight $40m revenge. 3 the hackers did demonstrate certain weak points in our design and user confusion, that was not obvious before.
— CZ Binance (@cz_binance) May 8, 2019
Binance Coin Plummets
Not unsurprisingly, markets reacted to the security breach by dumping Binance Coin, the exchange operator’s native token. The value of BNB was off by as much as 9% on Tuesday, reaching a low of $19.89, according to CoinMarketCap. BNB is currently valued at $20.26, having declined 8.7% over the past 24 hours.
BNB is by far one of the best-performing cryptocurrencies of 2019. The coin is up 227% since the start of the year. It peaked near $25 last month, having more than quadrupled in value since January 1.
Crypto Markets Decline
With the exception of Tron (TRX), all major cryptocurrencies had declined on Wednesday, as altcoins and tokens shouldered the heaviest losses. Bitcoin, which was targeted in the Binance attack, was down only 0.8% at $5,898.49. The largest cryptocurrency remains in a firm uptrend with the bulls eyeing $6,000 as the next major resistance test. Read more: Bitcoin Approaches $6,000 Following Overnight Surge; Will the Rally Continue?
Ethereum (ETH), which led the crypt0-market uptrend at the start of the week, dropped 4.1% to $169.99. Ether was up earlier this week amid reports that U.S. securities regulators were open to the idea of an ETH futures contract.
XRP declined 1% to trade at $0.3011. Bitcoin cash (BCH) fell 2.9% to reach $285.44. The value of Litecoin (LTC) was off by about 3.7%, having last traded at $74.11.
Following the latest drop, the cryptocurrency market cap is presently worth around $185.2 billion. The market reached $189.5 billion on Tuesday, a new high for the year.
Bitcoin continues to maintain a dominant grip on the crypto economy, accounting for 56.4% of the entire market cap.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock. Chart via CoinMarketCap.com.