What the Coincheck hack tells us about the current cryptocurrency market

in #cryptocurrency7 years ago

It tells us that things are very different than they were just a few short years ago when Mt. Gox was hacked for a similar amount of money!

The last time a major Japanese cryptocurrency exchange was hacked for a record amount of money, it took almost 2 years for prices to fully recover.

Those affected were never paid back and the exchange was made insolvent basically by the next day.

Over the coming months, the price of bitcoin plummeted by around 90% from peak to trough and altcoins were smashed equally as hard.

So, what is so different this time?

Well, for one, the size of the markets relative to what was stolen.

At Coincheck roughly $500 million worth of NEM was stolen, which is over $100 million MORE than what was stolen at Mt. Gox.

The difference is that at the time of Mt. Gox, the entire cryptcurrency market was worth about $10 billion, so the theft was somewhere around 4-5% of the entire market.

Now, the cryptocurrency market is worth around $600 billion, about 60X larger than it was back then.

So the $500 million dollar theft equates to only about .8%.

On top of that, Bitcoin was stolen at Mt. Gox, which represented about 90% of the entire cryptocurreny market, and this time NEM was stolen, which represents a very small portion of the entire cryptocurrency market.

Next, the number of exchanges is significantly different than it was back then.

At that time, there was really only a coupe of exchanges to trade bitcoin and altcoins on, now there are literally dozens, if not hundreds.

Which means one all the sudden becoming insolvent isn't quite as dire as it was back then.

There are many other options out there still.

Which also brings me to another point, this has been seen before.

At the time of Mt. Gox people hadn't seen something like that nearly as often as they do now. People know now that hacking comes with the territory if you are not careful with your cryptocurrency.


(Source: https://coinmarketcap.com/currencies/nem/)

Finally, investors who were affected by the Mt. Gox theft were never paid back.

Coincheck came out and said they will reimburse investors money to the tune of roughly $.81 per NEM coin that was lost.

Roughly 88.5 yen will be paid per NEM coin to the 260,000 customers affected.

This money is said to be coming from the exchange's own capital.

(Source: https://www.bloomberg.com/news/articles/2018-01-27/coincheck-to-repay-customers-who-lost-money-in-400-million-hack)

As you can see this situation is very different from what happened several years ago with Mt. Gox.

For these reasons it is no surprise the cryptocurrency markets have taken this potentially massively negative news in stride.

In fact, as I write this, prices appear to be inching up over the pre-hack levels, almost across the board.

I would not be surprised to see more and more exchanges start ensuring their holdings (if they don't already) and also keeping more and more customer funds in cold storage as opposed to hot wallets.

This is all part of the evolution and growing pains of this blooming asset class.

Stay informed my friends.

Image Source:

https://cryptocurrencynews.com/altcoins/ripple-xrp-nem-xem-largest-crypto-hack-ever/

Follow me: @jrcornel

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I wonder if people who leave their cryptos on exchanges remember to put their pants on?

Hilarious 😂

haha

lol

yeah but they are shitty

Have you sniffed them?

good info

Something interesting you might not of heard is that MTGOX is technically not insolvent anymore and should be paying back everyone the USD equivalent of their holdings at the time of the hack.

The price of bitcoin was around $450 at the time of the hack, with the price over $10,000 now the CEO is in a position to get over half a billion dollars AFTER paying everyone back

That's really interesting! And unfair...

Money = better health and better prosperity. As simple as that.

The calmer market reaction to this hack is a good sign and a stabilizing force.

This is True Great Article. I Was too surprised how there wasn't even a Big Media Story that caused much FUD~ At all... I also think this points to the fact that we've(cryptocurrency markets) Have been in a lull the past month and people/organizations are ready to see some strong action, Healthy growth in buyers as well as current prices to begin to increase at a tad slower but steady degrees.... As we continue to Grow in knowledge, comfort, and integration of cryptocurrencies to society Market Cap will grow but so will our tolerance levels.. We can see this from the Recent Crash of "Bitconnect" .. Lasting over a year ..were people losing savings, investments, broke even or made crazy gains(if they had timing)... Fall of that Scheme and the Lack of integrity in this new space,.. Helps us as A community and society to become stronger in Coins/ blockchain projects we do believe in and have track record. We double down in a sense because we truly believe this is the New innovation that will shape and mold society and life for the next decade and beyond **** We Can see past the spilled Milk,.. and realize this is just beginning and Vision of the Future will always outplay sight of the current state of being.

Great job, very interesting text

To me, this hacks is what will pave the way for more decentralized exchanges like Openledger, Bisq, Waves dex, etc. to come out, gain acceptance and adoption and grow tremendously.

The sooner everybody realizes this the better.
And I want decentralized exchanges.

Thanks @jrcornel for your tact and well written post. It is well researched and educative.

Happy Steeming

Those affected were never paid back and the exchange was made insolvent basically by the next day.
This is my main concern with investing any significant amount of money into cryptocurrency.

they say is the biggest heist in the world +100 mil then MT. GOX

As long as there are absolutely no reglementations in the exchanges market we will see more of this. I believe that the crypto’s are an infant that have’t event learnt to walk, the exception being BTC that is like an once very bullish uncle that now is 35 and is starting to become a little outdated.
We will either have regulations in the exchange markets or WE HAVE to go full power with decentralised ones.
Well documented post if you ask me. It deserves my vote and follow.