Bitcoins in turmoil after further hacking losses

Published:  7 Mar at 6 PM
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The arrival of Bitcoins as a unique, online currency seemed to be a boon for expats struggling with exchange rates, with many also using the currency as an investment and watching its value soar.

As with many other good things which come to bad ends, it now looks as though the Bitcoin boom is well and truly over, due to the discovery of yet another hacked loss of £362,000-worth of the virtual coins. The Flexicoin Bitcoin exchange has closed down following the discovery of 896 ‘coins’ missing from an electronic vault.

On discovering the theft, the exchange admitted online that it couldn’t cover the loss and was shutting down as a result. Only last month, another Bitcoin exchange closed down after hackers helped themselves to some 744,408 Bitcoins worth an estimated £210 million, and a third, Poloniex, admitted that hackers had stolen 12 per cent of their reserves.

Bitstamp also ceased trading for a short while last month following a cyber-attack, and Bitcoin payment processor was hacked last October to the tune of £600,000. Strangely, since hacking attacks began, the value of a Bitcoin has risen from £321 to £399.

The intended strength of the virtual currency was to be its independence from the conventional banking system, but that aim is now its main weakness. If trading companies cannot compensate investors due to a lack of liquid assets, then there’s no investor recourse for losses.

One of the attractions of the Bitcoin was its ‘Wild West’ frontier stance of no rules and no regulators, but there was no protection for investors. Its encryption software is state-of-the-art but, however brilliant the designer of the code, there’s always another genius able to break it.

Bitcoin investors will now have to face the decision to either leave their money in or transfer it to more conventional investments. Pulling out now while the price is still good is perhaps the right idea, as no-one knows when hackers will strike again.
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