Cryptocurrency Rally Makes Major Bitcoin Exchanges A Victim Of Cyberattacks
Multiple cyberattacks on major bitcoin exchanges this week highlight the many challenges for the young digital currency world.
A surge in investor interest also overwhelmed major bitcoin websites, while record-breaking levels of fundraising for new digital currencies add to worries that the largely unregulated cryptocurrency industry will be unable to manage the hype.
“Investors with assets on centralized cryptocurrency exchanges should be careful. The track records of these organizations are not good, and as the assets on the exchanges grow, so does the bounty for attacking or hacking them,” said Benjamin Roberts, co-founder and CEO of Citizen Hex, a digital currency trading start-up backed by three Canadian venture funds.
Bitfinex, the largest U.S. dollar-based bitcoin exchange, said on its status website Wednesday morning that its platform was under distributed denial-of-service attacks, or DDoS, that attempts to paralyze a system with a flood of information.
The attack followed a similar one reported Tuesday morning. That problem was resolved within an hour, and the exchange said Wednesday that despite the “ongoing attack,” “Most users will be able to use the platform normally though.”
The news followed smaller BTC-e exchange’s tweet Monday of a similar attack on its systems that afternoon, when its website also temporarily went down. By Wednesday morning, BTC-e had deleted the tweet and its website showed trades going through.
BTC-e and Bitfinex did not respond to CNBC requests for comment.
Chris Burniske, blockchain products lead at ARK Investments, told CNBC Tuesday that the attacks are “not surprising” given the bull market in cryptoassets.
“There’s a big difference between a denial of service attack, and a hack that causes clients to lose funds,” he said. “As of yet, we’re fortunately not seeing any of the latter.”
That said, Roberts and other digital currency analysts said the cyberattacks could allow the attackers to manipulate the bitcoin market. Since the price of bitcoin is set by several exchanges around the world, shutting off an exchange temporarily could allow a trader to take advantage of price differences.
Money floods into digital currencies
Bitcoin did briefly fall about $400 Monday amid some of the exchange issues, after topping $3,000 for the first time Sunday, more than tripling in value for 2017. Bitcoin traded near $2,571 Wednesday afternoon and today found the support at $2.020
Ethereum, another digital currency or token growing in popularity, has surged several thousand percent in that time.
“A speculative frenzy is never a good thing. I don’t think we’re there right yet,” Adam White, Coinbase vice president and general manager of its GDAX exchange, told CNBC in a phone interview. But “I do think the ICO or token generation events have … maybe a bit too much enthusiasm for them.”
A rush of funding for new digital currencies flooded them with millions of dollars this week.
Overwhelming website traffic
Separately, Coinbase, the operator of the second-largest U.S. dollar-denominated bitcoin exchange, reported Monday that customers could not access the website amid high traffic. The firm reported two other incidents of “degraded performance” on Tuesday.
“We recognize the frustrations of our customers and we want to do better,” White said.
A record 2,700 attended CoinDesk’s annual Consensus conference in New York this year, according to CoinDesk CEO Kevin Worth. He added that the website has hit record unique viewers and page views since.
The cryptocurrency companies are also expanding their businesses.
CoinDesk moved in the last few weeks to a new office in Midtown Manhattan and is looking to expand its team to 28 people. Coinbase has 25 open positions listed on its website, including one for “Head of Institutional Sales & Trading” at GDAX based in San Francisco, CA, or New York, NY.
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