Bitcoin Price Proves Resilient Against Centralized Hacks
Hacks on centralized exchanges have had limited effect on Bitcoin’s short term and long-term price Diar number crunching shows. With the possibility of stolen coins being blacklisted and blocked from being deposited by exchanges who wish to remain compliant with Anti-Money Laundering and Know-Your-Client (KYC) regulations, fiat off-boarding mass sums, while not impossible, becomes tricky.
Diar found that at least 1.43Mn BTC have been previously involved in theft, which account for approximately 12% of all bitcoins in circulation (Diar, 18 December 2017).
The majority of cryptocurrencies, including Bitcoin, are pseudo-anonymous and therefore, the coins can be tracked with Blockchain analysis. The stolen cryptocurrencies are actively monitored and the exchanges are instructed not to accept any deposits in stolen coins. Since all of the exchanges with enough liquidity are KYC compliant, the stolen coins are essentially rendered useless and the supply is effectively decreased.
Diar looked at ten of the largest Bitcoin hacks from exchanges and analyzed the effect that the hacks had on the price (see table). Even though the hacks introduced increased volatility on the markets, the price developments showed that Bitcoin is actually quite resilient against exchange hacks – even in short term. The effect of exchange hacks on Bitcoin’s price are not profound. The ecosystem seemingly, shrugs off the incessant amount of breaches against exchanges. Of course – this is not the fault Bitcoin infrastructure but the security measures, or lack thereof, adopted by exchanges.
Frequent exchange hacks incentivize Bitcoin holders to manage their private keys themselves and thus makes them trade less often and rather hold long term. The thefts diminish the trust in centralized exchanges and consequently increases the trust in a decentralized cryptocurrency that can be managed by users individually. But even decentralized exchanges haven’t found much of an audience and account for a negligible 1% of traded cryptocurrencies (Diar, 5 February).
Bitcoin Prices Post Exchange Hacks
|Exchange||Date||BTC Stolen||USD (Date of Theft)||BTC Price||1-day effect||3-day effect||15-day effect||1-year effect|
|Mt. Gox||February 25, 2014||650,000||$357,500,000||$534.71||7.93%||1.72%||18.08%||-55.63%|
|Bitfinex||August 2, 2016||119,756||$67,662,140||$552.82||2.25%||4.00%||3.42%||409.09%|
|PicoStocks||November 30, 2013||5,896||$6,633,000||$1,124.76||-15.81%||-4.99%||-21.81%||-66.47%|
|Bitstamp||January 5, 2015||18,886||$5,193,650||$272.95||4.63%||3.77%||-22.89%||58.36%|
|Cryptsy||January 15, 2016||13,000||$5,005,000||$358.77||8.05%||7.55%||5.06%||129.23%|
|Yapizon||April 26, 2017||3,816||$4,903,560||$1,284.84||3.45%||3.28%||40.67%||-|
|OKEx||October 30, 2017||600||$2,642,400||$6,121.80||5.32%||14.84%||7.79%||-|
|BTER||February 15, 2015||7,170||$1,684,950||$234.33||-0.33%||0.80%||15.80%||70.48%|
|Bitcurex||October 28, 2016||2,300||$1,587,000||$688.10||3.60%||1.35%||2.25%||733.14%|
|KipCoin||February 17, 2015||3,000||$735,000||$243.60||-3.03%||0.07%||11.63%||70.59%|
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