The price of bitcoin plummeting by more than $1,000 in the space of an hour Wednesday amid a regulator clampdown and rumors that the world’s largest cryptocurrency exchange had been hacked.
Account holders at Binance, the largest exchange by volume, reported irregular trades, with other cryptocurrency holdings converted into bitcoin without permission.
“WTF is happening,” one user cried out on Reddit. “Binance just sold all my [altcoins] at market rate.”
The reports fuelled speculation that Binance’s platform had been hacked, leading to a huge bitcoin price drop. In the space of 62 minutes, the price of bitcoin went from $10,541 to $9,481 according to Coindesk’s price tracker.
Other major cryptocurrencies followed bitcoin’s lead. By Thursday morning, the world’s most valuable digital coin was heading back towards the $10,000 mark.
It transpired Binance’s platform had not been hacked, although 31 of its account holders had been tricked into handing over their account details by a group of hackers.
The group had been compromising accounts since January by creating websites that looked almost identical to binance.com, where users entered their account details.
The criminals sat on this information until Wednesday, when they attempted to boost the price of a digital coin called viacoin. Using the compromised accounts the hackers placed orders for viacoin at high prices — with the hackers selling their own viacoin at the other end.
Binance said the group selected viacoin as it was “a coin with smaller liquidity, to maximize their own gains.”
The CEO of Binance, Changpeng Zhao, said that the hackers were unable to withdraw any of the bitcoin they accumulated, and the trades were eventually reversed. In fact, the hackers likely lost a lot of money in the attempted scam, which Binance says it will now donate to charity.
The incident highlighted the vulnerability of bitcoin and other cryptocurrencies to wild price fluctuations based on relatively small factors.
The Security and Exchange Commission (SEC) announced Wednesday that it would now require online platforms trading digital assets that are considered securities to register with the agency — another contributing factor bitcoin’s price drop, according to some analysts.
"The SEC staff has concerns that many online trading platforms appear to investors as SEC-registered and regulated marketplaces when they are not,” the agency said in a statement. “Many platforms refer to themselves as “exchanges,” which can give the misimpression to investors that they are regulated or meet the regulatory standards of a national securities exchange.”
Cover image: A Bitcoin cryptocurrency coin at the DeeCrypto retail store selling cryptocurrency mining equipment. (Artyom Geodakyan\TASS via Getty Images)