January 7, 2015
Happy New Year seems like an empty wish to Bitcoin owners. 2015 has definitely not being kind to bitcoin so far. The crypto currency, which has seen a stiff decline in its price since late 2013 heights, is back below $300 mark. The recent days have also seen a slip in the total Bitcoin transaction volume, as measured by blockchain.info.
Theories as to why the price has slumped are abound but there’s a lack of consensus among the bitcoin enthusiasts. Obviously, the decline in trading volume could indicate a fall in short term buy side interest in bitcoin but why that would occur at the start of the New Year isn’t clear.
Bitstamp, the second-largest dollar-bitcoin exchange, suspended operations early Monday, signalling what some are calling a watershed moment for the cryptocurrency.
The U.K.-based exchange said it would be halting withdrawals and dissuaded customers from making deposits following what it implied was a security lapse.
Bitstamp maintains that less than 19,000 bitcoin (about $5.1 million at Monday’s price) were lost after the security lapse, according to a spokeswoman. The exchange’s customers can also “rest assured” that they will be able to recover the full amount of their cryptocurrency stored with Bitstamp before the suspension, CEO Nejc Kodrič said in a statement provided to CNBC.
Bitstamp has previously said that it tries to keep up to 90% of its funds on hard drives, known in bitcoin jargon as “cold storage,” that are off the grid and therefore harder to hack into. This attack appears to have targeted the remaining 10-15% of cryptocurrency that is stored on servers in a data centre called “Hot Wallet” which is a more convenient way of carrying out transactions.
Experts believe that the reaction of Bitstamp might go deeper than the security breach. A commentary in Financial Times posted that issues can lie in the company’s financials becoming unhinged by the falling bitcoin prices or the economics of mining taking their toll on exchanges.