Bitcoin's value plummets after $100m heist

  • 04/08/2016
BERLIN, GERMANY - FEBRUARY 15:  In this photo illustration model Bitcoins are seen on February 15, 2016 in Berlin, Germany. (Photo Illustration by Thomas Trutschel/Photothek via Getty Images)

Nearly 120,000 units of digital currency bitcoin worth about US$72 million (NZ$100 million) has been stolen from the exchange platform Bitfinex in Hong Kong, making it the second-biggest security breach ever of such an exchange.

Bitfinex is one of the largest exchanges for bitcoin, and is known in the digital currency community for having a platform that has deep liquidity in the US dollar/bitcoin currency pair.

Zane Tackett, director of community & product development for Bitfinex, told Reuters on Wednesday that 119,756 bitcoins had been stolen from users' accounts and that the exchange had not yet decided how to address customer losses.

"The bitcoin was stolen from users' segregated wallets," he said.

Bitcoin plunged just over 23 percent on Tuesday after the news broke. On Wednesday it was up 1 percent at US$545.20 (NZ$762) on the BitStamp platform.

Tackett added that the breach did not "expose any weaknesses in the security of a blockchain", the technology that generates and processes bitcoin, a web-based "cryptocurrency" that can move across the globe anonymously without the need for a central authority.

The volume stolen amounts to about 0.75 percent of all bitcoin in circulation.

"It's the biggest USD exchange, so outside China it's the one that everyone has an account with," said Antony Lewis, a bitcoin expert in Singapore.

"It's very liquid, folk can trade on margin, lots of daily volume."

It is not yet clear whether the theft was an inside job or whether hackers were able to gain access to the system externally.

Bitfinex suspended trading on Tuesday after it discovered the breach. It said on its website that it was investigating and co-operating with the authorities.

The attack on Bitfinex was reminiscent of a similar but larger breach at MtGox, a Tokyo-based bitcoin exchange that was forced to file for bankruptcy in early 2014 after hackers stole an estimated US$650 million worth of customers' bitcoins.

Reuters