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Binance Hack Leads to a $122bn Wipeout for the Crypto Market

 3 min read / 

The true-scale of Wednesday’s attempted Binance hack has resulted in a 25% collapse across the cryptocurrency market as prices continue to plummet in mass sell-offs.

The cryptocurrency market capitalisation, the sum total of all coin value, has dropped precipitously since the beginning of the week. At Wednesday open, the total market cap was worth $438bn but by the end of the day, had fallen to $405bn.

As of Friday morning, the market has continued on its downwards trajectory reaching a low of $344.8bn at just after 06:00 GMT. Since the beginning of the week, when it was at $466.5bn, the coin market cap has shrunk by 26%: a $122bn wipeout.

Although trade volume has stayed more or less where it was at the beginning of the week, the price of cryptocurrencies, such as Bitcoin (BTC) has continued to fall, suggesting investors are exchanging their cryptocurrency for fiat.

If the market continues on its present course, it will delve to depths not seen since the 6th of February, when the high-profile economist Nouriel Roubini declared the cryptocurrency bubble, “the mother of all bubbles”, had well and truly burst.

(Source: CoinMarketCap)

The despair doesn’t run so deep but it is a reaction to an attempted heist on the cryptocurrency exchange Binance. In a statement released on their website yesterday, Binance, said that in a two-minute window just before 15:00 GMT on Wednesday, the exchange experienced abnormal trading activity in the VIA/BTC market.

According to their summary, hackers had accumulated account credentials through a near-two-month phishing attack that started at the beginning of the year. The group, which the exchange says was well-organised, then created API keys which could be used to verify each account.

The hackers waited for an opportunity to begin placing orders to maximise their returns. On Wednesday afternoon, they placed significant orders for Viacoin (VIA) leading to the trade volume to shoot up from $8.3bn to $34.6bn from 14:25 GMT to 15:25 GMT. In the same timescale, the price of VIA rose by 139% from $2.74 to $6.55.

The intention of the hackers, according to Binance, was to transfer Bitcoin from their affected accounts into 31 other accounts which were pre-deposited with VIA coins. As the price of VIA rose, these accounts began placing large orders in the BTC/VIA market.

As the accounts filled up with Bitcoin, the hackers immediately began to place withdrawal requests but this was picked up by exchange’s risk management system which automatically disabled the withdrawals and froze any further VIA deposits. Binance has said that the attempt was unsuccessful and that all funds deposited on the exchange are safe at present.

Based in Hong Kong, Binance is one of the most widely used cryptocurrency exchanges out there, and also one of the largest, offering trading pairs with over 279 different coins. With a trading volume of over $1.6bn, it is far larger than many of its competitors. Following the successful $500m crypto-heist on the Japanese exchange Coincheck in late January, the market, which was already on a slight downwards trajectory also took a $59bn hit.

On Wednesday, America’s Securities and Exchange Commission (SEC) announced plans that all cryptocurrency exchanges operating within the US would have to register with the agency, or qualify for an exemption, in order to continue trading.

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