The hacking of Bithumb, one of the largest exchanges in Korea, sent a new shock to the cryptocurrency world today.
Bitcoin was on an upside trend and was about to challenge the US$7,000 resistance line prior to the hacking. However, the hacking practically put an end to the upside momentum, triggering a panic sell when the market became aware of the news.
Having said that, the downside pressure does not appear to be significant given the side of Bithumb in the cryptocurrency space. I consider that there are a few mitigating factors that may explain the relatively strong performance of Bitcoin
- Bithumb suggests that clients' assets were not affected as the hacking concerned only cryptocurrencies owned by the exchange (However, this does not stop the hackers to sell the cryptocurrencies that they acquired through the hacking!)
- The present price of Bitcoin which is in the range of US$6k - 6.8k is already below the mining cost/very close to it. This provides a technical support to Bitcoin in its present level.
- Some hot money is in the cryptocurrency market this week- Speculators are worried about the situation in Italy and its potential withdrawal from the EU. They are also concerned about China and the US will go for a trade war. The Shanghai Composite Index is in its 2-year low. In fact, there are risks elsewhere in the stock markets of emerging markets such as China, Korea, Thailand where the stock market is in trouble since last Friday.
Source: CoinDesk