What the Coincheck hack tells us about the current cryptocurrency market

in cryptocurrency •  7 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

  ·  7 years ago (edited)

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

  ·  7 years ago (edited)

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.

Great view of the markets and how this time the hack on exchanges was not the same as the Mt. Gox exchange - it's very interesting to see that even though the volume that was stolen was larger, the actual percentage when compare to the total market size was smaller.

It clearly is very different due to all of the factors that you mentioned, but I think it really reinforces the fact that we people need to keep their cryptos in wallets, especially hardware wallets.

Thanks for sharing!

This news update about cryptocurrency hack history base.It is very informative and educative valuable.You have included more detail about all currency update.Carry on you activity
This is very helpful for us.Thank you very much

great informative post, thank you :)

Take my upvote, have a nice day ;)

The fact that coincheck acknowledged the hack and agreed to compensate users has come as a major relief and hasn't led to greater damage.. ONe does have to ask though - could this situation have been avoided had this been a decentralised exchanged? If so, it's more imperative that one moves to such exchanges in the future for the sake of better security

Nice man... nice information...!!!

can bitcoin will up again and cross 35000$ end of this year

I am very much hopeful about that :)

It tells me it's too late at night to worry about this now ... and never to keep all your eggs in one basket!

Really nice content that you discussed, thank you for sharing

Im glad they are getting a large % of it back.

or it could be just an excuse for a scammer to run away whith our cash... we been hacked bla bla ..it's a polite way to say you've been husled... i realy hope that things will work out

The hack indeed didn't affect the cryptomarket like it did when Mt Gox got hacked some years back. The crypto currency has indeed spread far for $500m worth of NEM to affect it. And from the comparings the two situations are different. I believe by then cryptocurrency was just opening to the world.
Am glad the customers are going to be compesated, which is something fair because they too didn't expect this.

From the moment I have read about the hack, I am willing to know more about the security features in Kucoin and Binance. Is google authenticator enough for the security or they should add more layers of security. What you think guys ??

Now it make sense for the XEM recent pullback. News travel so fast in crypto. It maybe time to start looking at decentralized exchanges just to secure my cryptos better. Thanks. 0.8% of the total crypto market cap or 4-5% it is still hard earn capital that needs to be safe guarded. Good for coincheck to reimburse its holders of XEM. Thanks.

We all learn with our mistakes, and as you said, times changed and now the size of the market is just to big to drop in a significant way.
Having platforms that guarantee your funds will be awesome and I hope we can start to see some news about it!

Well well well, this is an interesting piece of information. Thanks.

there are a couple of points i'd like to make clear. While proof of importance may seem like, POS, its not, it not only factors in the amount an account in, but also how active that account is sending and receiving xem. Also, you dont need to be a supernode to vote, all you need to have is 10k vested. In addition to this NEM also provides a unique solition to notarization/ digitization of assets through mosaics. From a dev standpoint i feel that NEM is the easiest to integrate in any application, probably the easiest API to work with

Very educative and informative post. Thanks @jrcornel for sharing

I think Bitcoin gonna cross over $40,000 during last time of this year . What do you say ?
@jrcornel

I think that we're going to see a lot of this sort of things while cryptos are still in their early stages of development. As time goes on I think that the remaining cryptos will be much more solid and stable in the future.

I have always been wary of keeping my coins on any exchange. I try to move them out ass soon as possible. I use a combination of Exodus and nano Ledger. It has worked out so far. No problems.

Wooow fantastis the post l like

Anyone investing in the cryptocurrencies markets at the present time should read this. The hack will have negligible impact on the crypto ecosystem compared to what will happen when Tether goes bust.

Mt. Gox was just the tip of the fraudulent iceberg. The article is long but the information contained within is excellent food for thought. Sorry to post this here like this but it's a summary of what has happened and how prices have gotten this high and I believe everyone should have a chance to take a look for themselves.

https://hackernoon.com/a-brief-history-of-bitcon-cf358da30bf0

Looks like we need to beef up security on these exchanges still!!!

Decentralized exchanges please

nice post about cryptocurrency, I love it,such a well planed writeup and informative post

It is very impressive that the exchange is paying back the customers for lost funds - a huge change from the other times we've seen this happen. If more hacks are handled in this professional manner, we'll see cryptocurrency get a better reputation for safety.

Thank you for the lessons you provide us
We hope that everyone will benefit from it

Upvoted and Resteemed by @cryptoryno33

You are MISSING a huge part of this story:

The NEM foundation tracked all of the stolen coins, notified the major exchanges, and "froze" deposits from the thieves wallets. This happened almost immediately. In other words, the stolen coins have been rendered useless.

Ironically, this reduction in supply (or "float" available for trading) will benefit existing XEM holders, those of us who dealt with security conscious exchanges, not lax Coincheck, and also who have our own wallets.

XEM holders and also the NEM foundation, for its fast, principled response, may turn out to be the real winners here -- along with those who bought the dip. Just my two cents.

People know now that hacking comes with the territory if you are not careful with your cryptocurrency.

Exactly, having a ledger wallet or a trezor is a must in the crypto business, we are meant to be our own banks with cryptos, not some exchange

I saw the news on BBC but no coin was mentioned . At least the exchange has agreed to pay some back, why hackers won't channel their energy into useful ventures beats me.

i wonder if i'll see a small % of my 7 BTC ever again? :-( if i do, i hope its in BTC ;-)

It tells us the same thing. Keep your stuff off exchanges and take hold of your assets! SO SIMPO

I will see your post and I resteem your post

This tells me that crypto is now resilient as hell and far bigger than mtgox days, nem bounced in little over a day, last time this happened we had a massive slump for 2 years. Go NEM Go NEM :)

Nice blog! Keep it up!

Mt.gox wasnt hacked bro, you should read up on that...

Is it dangerous for our assets ?

It's good to see that those things are handled differently now, but they shouldn't really be happening. Exchanges are indeed scary!

I read today of a a member of my team who had 404 BTC in MtGox. It a lesson to learn yet we all still get caught out leaving coins on Exchange. Its almost impossible to trade otherwise.

I like your blogs.. RESTEEMED & UPVOTED
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