Fraud scandals knock 20pc off bitcoin’s value
BITCOIN tumbled from recent highs as the digital currency was hit by a series of controversies.
Its price fell to less than $16,500 (£12,310) yesterday, which was almost 16pc below Sunday’s record of about $19,547 (£14,580).
It came as a leading US exchange revealed it was investigating possible insider trading, while another in South Korea went bust after a cyber attack.
A separate blow came from Australia, where researchers claimed half of all bitcoin transactions enabled trade of illegal goods such as drugs and weapons.
Fears of insider trading emerged after Coinbase, a San Franciscobased exchange, revealed it was investigating a suspicious spike in the price of bitcoin cash.
The rival currency, which is almost identical to bitcoin, surged to $8,500 (£6,347) on Tuesday, just hours before a surprise move by Coinbase to launch it on its own platform.
Brian Armstrong, Coinbase’s chief executive, said a probe would try to establish whether any employees took advantage of their knowledge of the secret plans.
He wrote: ‘It appears the price of bitcoin cash on other exchanges increased in the hours before our announcement.
‘I take the confidentiality of material non-public information very seriously. If we find evidence of any employee or contractor violating our policies– directly or indirectly– I will not hesitate to ... take appropriate legal action.’
In South Korea, the Youbit exchange filed for bankruptcy after a cyber attack saw hackers steal bitcoins suspected to be worth more than £60m. The heist has been blamed on North Korea. Youbit said it was calling in administrators and would try to minimise customer losses.
It followed several other similar attacks on other exchanges in the Asian country.
Australian researchers yesterday said concerns over bitcoin threatened to undermine enthusiasm for the blockchain technology which underpins it.
The researchers from the University of Technology in Sydney, using forensic accounting techniques, said they had found half of all the currency’s transactions facilitated trade of illegal goods such as drugs, weapons and stolen software.
‘This sort of illegal activity risks stunting the adoption of this technology and limiting the potential benefits to society,’ said Professor Talis Putnins. Legal users, meanwhile, often seemed to just buy the currency and hold it.
The frenzy surrounding bitcoin continues. But in a cruel twist of fate, many people who bought it years ago before its massive surge in price have been unable to access it.
Because they can’t remember their security codes, investors had turned to hypnosis and ‘brute force’ supercomputing to try to get to their bitcoins, the Wall Street Journal reported.