The unpredictable progress of Bitcoin hit another downward spiral as more crooked dealings were revealed.
Bitcoin hit a two-year high of around $775 just a few days ago and then plunged by 25% after a major exchange went offline after an attack by hackers.
Investor confidence was badly shaken when an estimated $50 million of the virtual currency was siphoned from platform Decentralized Autonomous Organization (DAO).
The DAO funds projects with Bitcoin.
The organisation has gone offline while software engineers identify and rectify security flaws in the system, which is not directly linked to the Bitcoin blockchain database.
Cyber attack on exchange
“The cyber-attack was identified and we had to stop trading temporarily,” said spokesman Vitalik Buterin.
Efforts are underway to try to recover investor funds from the hacker.
Several online Bitcoin repositories or exchanges have lost millions of dollars in funds either to hackers or internal frauds.
The ability of criminals to target Bitcoin despite blockchain security has seriously affected the value of the virtual currency.
Another trader, Bitfinex also stopped trading this week claiming ‘network instability’ was putting customer funds at risk.
Betfinex advertises itself as the ‘world’s largest and most advanced cryptocurrencies exchange’.
The company stopped trading at least twice this week, citing infrastructure issues as the problem and confirming no money was lost or at risk.
Bitcoin is a virtual currency that only exists in electronic vaults on the internet. Sophisticated security provided by software called a blockchain protects money held by traders and investors.
Many Bitcoin users are concerned about the security of their holdings after several exchanges failed with the loss of millions of dollar’s worth of the currency.
The most significant was Japan’s Mt Gox exchange which went down in February 2014 blaming technical issues. It was later revealed that hackers had stolen Bitcoin worth millions, forcing the company into bankruptcy.
The Mt Gox experience is why so hacking incidents spook the Bitcoin community so much.
Bitcoin is not regulated by any central bank or government. The value is determined by demand and supply. In a few days, supply is expected to fall as the software puts a scheduled built-in brake on generating new Bitcoin. The reduction or ‘halving’ is expected to increase the value of the virtual currency.