Bitcoin Tumbles Then Rebounds After Hackers Steal $31 Million Tethers

Tyler Durden's picture

The rise in Bitcoin’s price was approaching "warp speed" above $8,200 overnight when, as so often happens, it went into another sharp reversal. After hitting an intra-day high of almost $8,265 in early trading on Tuesday, the price crashed more than $400 to $7,827, its biggest drop since November 13. This time it wasn’t another Dimon-esque rant, or the prospect of another fork (technically, these are bullish) but an old-fashioned theft in another cryptocurrency, Tether. Tether is a controversial crpto-business which provides a wallet service allowing crypto exchanges to store and convert fiat currencies to "safe" tokens (not to be confused with an ICO token) and vice versa.

Tether has a market cap of roughly $673 million and is the world’s nineteenth largest cryptocurrency, based Coinmarketcap.com data. Regarding the theft, Tether alleges that $31MM of USDT tokens (Tethers trading at parity with the dollar) were stolen on 19 November 2017.

From the Tether press release:

Tether Critical Announcement

 

Yesterday, we discovered that funds were improperly removed from the Tether treasury wallet through malicious action by an external attacker. Tether integrators must take immediate action, as discussed below, to prevent further ecosystem disruption.

 

$30,950,010 USDT was removed from the Tether Treasury wallet on November 19, 2017 and sent to an unauthorized bitcoin address. As Tether is the issuer of the USDT managed asset, we will not redeem any of the stolen tokens, and we are in the process of attempting token recovery to prevent them from entering the broader ecosystem. The attacker is holding funds in the following address: 16tg2RJuEPtZooy18Wxn2me2RhUdC94N7r. If you receive any USDT tokens from the above address, or from any downstream address that receives these tokens, do not accept them, as they have been flagged and will not be redeemable by Tether for USD. 

What is especially troubling, is how easy it was - in retrospect - to "steal" over $30MM worth of cryptos and send them on to a "non-extradition" address. As per Tether’s announcement, the $31MM was simply sent to "an unauthorised Bitcoin address." While likely futile, the company took steps to recover the loast money: as The Crunch reports:

In response Tether said it has flagged the tokens — meaning that it will track them and prevent the holder from exchanging them through its service — and that it is working to recover them. For partners, the back-end wallet service has been suspended. Tether said it will investigate the incident while it rolls out an update to Omni Core — its software for partners — that will prevent the stolen coins from recirculating into its ecosystem by essentially locking them into the alleged hacker’s wallet.

Where things begin to get murky, is the extent to which there may or may not be a relationship between Tether and another controversial player in the cryptocurrency space, Bitfinex. The latter is the major crypto exchange which was famously hacked in 2016, after which the Bitcoin price fell 20%. The Crunch notes that some crypto players are already expressing concern about a potential “inside job”.

One of the partners that uses Tether is crypto exchange Bitfinex, which itself lost 119,756 bitcoin — then worth $72 million but valued at over $950 million today — in a hack over a year ago. As Coindesk reports, the incident is sure to throw up more questions about the relationship between Tether and the secretive exchange Bitfinex. The duo are rumored to share owners, and have been accused of leaning on each other to manipulate the market. Already, there are theories circulating that suggest this new attack could be an inside job.

This latest hit to Bitcoin is likely to prompt more discussion of the relative advantages of gold versus Bitcoin. In a recent post On Zero Hedge, John Rubino cited an article on the Risk Hedge website “All the Reasons Cryptocurrencies Will Never Replace Gold as Your Financial Hedge” in which security was highlighted as one of the key risks for cryptos.

#4: Lack of Security Undermines Cryptocurrencies’ Effectiveness.

 

Security is a major drawback facing the cryptocurrency community. It seems that every other month, there is some news of a major hack involving a Bitcoin exchange.  In the past few months, the relatively new cryptocurrency Ether has been a target for hackers. The combined total amount stolen has almost reached $82 million.

 

Bitcoin, of course, has been the largest target. Based on current prices, just one robbery that took place in 2011 resulted in the hackers taking hold of over $3.7 billion worth of bitcoin—a staggering figure. With security issues surrounding cryptocurrencies still not fully rectified, their capability as an effective hedge is compromised. When was the last time you heard of a gold depository being robbed? Not to mention the fact that most depositories have full insurance coverage.

In another recent post, “Doomsday Preppers Are Switching Allegiance From Gold To Bitcoin”, the issue of security was also prominently discussed. However, for preppers, the main issue was what would happen if the grid failed. As we’ve suggested, it’s hardly surprising given Bitcoin’s performance that investors and preppers alike have switched their allegiance towards the pre-eminent crypto-currency. However, more events like this, will only add to the view that there is a place in portfolios (and bunkers) for both. After Bitcoin topped $8200 yesterday, we noted the following amusing comment from currency brokerage ForexTime.

“I find it remarkable and somewhat frightening how, no matter how much Bitcoin is pummeled by sellers, it simply bounces back even stronger.”

We’re not there yet, but the price is already closing in on the pre-theft record high of $8,300 as we write.

And, as Bloomberg adds, the incident is the latest in a long list of hacks which while denting confidence in the security of cryptocurrencies, "typically have fleeting market impact: bitcoin has surged to one record after another during the past few years despite major thefts from exchanges including Bitfinex and Mt. Gox."

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gunzeon's picture

The honey badger don't give a shit !

Pandelis's picture

these are small issues, that can be fixed very quickly - i wouldnt worry about it.

paint it red call it hell's picture

Thanks for the 'nothing to see here, move along folks' reassurace to the bitcoin marks...

Don't spend it all in one place.

Laowei Gweilo's picture

eerily reminscient of banks...

profits sure change how people here suddenly view bad news lol

 

StackShinyStuff's picture

Just checked - my bitcoins are still there at the bottom of the lake...no wait...

FactDog's picture

Just another reason we should be regulating the shit out of the exchanges.  The problem is at the on and off ramps of BTC and other cryptos.   

Hey, I am an anarchist at heart, but there should be laws with teeth that can protect us from the crooks that work the halls of exchanges.

 

Endgame Napoleon's picture

They could have some kind of catastrophic crypto-insurance policies.

Twaddlefree's picture

Just what we need...credit default swaps on cryptocurrencies. Yeah, that'll work.

Zero_Ledge's picture

There are many different Pokemons to collect!  Try to collect them all !

Two Theives and a Liar's picture

Yeah...because "regulated" markets really work..like the Comex. What a shining example of fairness and transparency!

Justin Case's picture

Bitcoin is a virtual game that is being made look better than gold or silver, to sell the concept of a world wide virtual currency.

It should change its name to “Nintendo Virtual Foolishness,” as it’s purpose is to win the hearts and minds of a public.

After that to construct a “Dollar Index Bit Coin” backed by tickets to Mars from Space Inc. with a picture of Elon Musk.

There is no computer game that can not be hacked, and there never will be.

Regards,

Jim Sinclair

eforce's picture

As I said in the past few articles about Tether being used to pump Bitcoin...

wulf's picture

As someone wrote in other site:

Amount of Tether "stolen": $30,950,010.00

Amount of negative shareholder equity, yesterday: $30,615,336.74

Buttcoin comedy gold: Priceless

Drachma's picture

The global reset has been initiated.

“It may not be wise to dismiss virtual currencies,” Lagarde [IMF] told the audience. “Instead, citizens may one day prefer virtual currencies.”

IMF - ACC - SDR

We all know how this ends; exactly how the globalists intended. Cheers.

ejmoosa's picture

If you are an anarchist, then you need to pick better folks to do business with.  Don't rely on a government to come to your rescue.  

Justin Case's picture

I like Bitcoin because of it's attributes, unregulated and totally anonymous.

NobodyUknow's picture

Just FYI, basic Bitcoin use should be thought of as NOT anonymous.

Every address is tracked and every BTC moved from address to address is tracked in the blockchain. When you cash out via an exchange you're taking those USD in your name. Right now the exchanges aren't required to issue 1099's but that'll probably change in the next 12-24 months, and the gov't may go back in history to how sold BTC for USD at any time, ever, via that exchange. So the gov't will KNOW how much you cashed out of BTC, and they'll be able to trace the addresses where that BTC has been moved around between. 

There are other crypto currencies that DO provide anonymitity, and there are way to make BTC movement more anonymous or completely anonymous but that requires additional user knowledge and actions. Think of using a cryptocurrency exchange as a stock brokerage account. You can move stocks from one brokerage house to another but that's recorded and when you sell that stock the brokerage and gov't know who you are and how much you made. Just recognize that in the USA, your cryptocurrency profits will be taxable and plan accordingly. 

My Bitcoin and Etherium purchases earlier this summer are up a few thousand dollars in unrealized gains. If I cash out and realize those gains into USD, I'll have to pay taxes to the IRS. Same as the gold Eagles coins, AAPL, NFLX stocks, etc which are up a lot in unrealized gains. When I sell and realize those gains in USD I'll have to pay taxes on the gains. 

If you want to own and trade cryptocurrencies "under the radar", do more research. It can be done, but requires knowledge and planning.

HappyDeathMetal's picture

buy silver with bitcoin then sell for cash?

Twaddlefree's picture

Like all the laws we now have with teeth that mean nothing if they are not enforced.  And, we know that "enforcement" means only collecting billions in "fines" to be disposed of however the government sees fit.

BarkingCat's picture

"these are small issues, that can be fixed very quickly - i wouldnt worry about it."

 

This to me is representative of the whole Agile software development methodology. Always in a hurry to create the next release. Most places I know run on 2 week sprints (release cycles).

There is always shitty code that has not been fully tested that goes out.

Yeah, they might fix the immediate problem but introduce new ones.

c2nnib2l's picture

Bitcoin Sect don't want to hear about those things 

 

Bitcoin ! to the mooon ! 

blentus's picture

About what things?

Could you be more specific?

Justin Case's picture

31 million is chump change for these boyz here. They don't worry about minor hackers, until it's them. Then they want the Gov't involved in their business when someting goes rong. Something like a hypocrite.

blentus's picture

I mean, what 'things'?

I have no idea what you both are talking about.

markettime's picture

I thought is was just written in the code for BTC to go to some really large number no matter what.

Badsamm's picture

Where is Ukraine’s gold? Where is Libya’ gold? Where is the US’s gold?

Yen Cross's picture

 How many times do I have to say, I'm  long blockchain?

   I have zero interest in cyber-chits.

gunzeon's picture

well, blockchain is only useful to entities that do not trust eachother and need to be decentralised.

So, this excludes any commercial organisations like banks and governments; we assume these people trust their own minions by definition and can far better manage their data in datacenters with high availability and DR failover to the eyeballs and microsecond response to db xactions.

Sure, they like to jump on the bandwagon and use the word, but they do not need it and are jerking off by saying they can use it.

I can't think of any other uses for a blockchain other than cryptocurrency ... any suggestions ?

 

 

Yen Cross's picture

  I'm long block-Chain Go "Uncle Nasty" all you want.

 I'm retarded

DownWithYogaPants's picture

You have to think when the Private Central Bankers ( PCBs - 100x as nasty as the transformer oils ) would come at CCs via the code and hacking.  I am surprised it's not more.

auricle's picture

If Etherium programmers could delete $400M then this digital system is a mirage. Just wait till a mole contributes, maybe one already has. 

Wile-E-Coyote's picture

What I find odd is Ethereum took a proportional dive at the same time, how can this be?

tmosley's picture

> If you receive any USDT tokens from the above address, or from any downstream address that receives these tokens, do not accept them, as they have been flagged and will not be redeemable by Tether for USD.

Tethers ain't dollars, guys.

There is a reason I have been trying to educate the population as to the meaning of the word "backing", and why the concept is not compatible with cryptocurrencies.

This is a fraud vehicle, and it is on the verge of failure. Beware.

Wile-E-Coyote's picture

Ummmm I went and had a look at a number of other crypto's and they all dipped at about the same time and in proportion to BC. Now I'm no expert at all but there appears to be an implication that these coins are somehow linked in real time. If BC was robbed then there should be no instant effect on other offerings I would have thought. I was under the impression they are all independent of each other. What if they are not.................... I'm open to an explanation.

tmosley's picture

Hard to say. These markets are complex, and Tether is in tight with the altcoin exchanges.

On the plus side, it did provide a nice pivot for me to trade some of my fairly steady BCH for falling IOTA. Balance out my portfolio a little bit.

iamrefreshed's picture

$300 to $2300 and back to $1000 in less than 30 days and you call that steady? For all we know you paid $2300 keyboard warrior.

tmosley's picture

Low testosterone response.

DisorderlyConduct's picture

Nothing travels faster than bad news. Buyers in other markets are shaken because all crypto is based upon the same basic premeses. The implementations differ, but they are the same kind of thing. So if a heist happens to one, fear grips the others. You didn't see other assets drop similarly because they do not share any commonality to cryptos. If this were a big enough deal I'd expect to see an uptick in gold as people temporarily exit crypto to watch and see if it's all OK - and then pop back in later. But a heist on an exchange isn't a big enough deal.

I think this also shows uncertainty and maybe overextension. The higher they go the more people will be on edge to protect their wealth.

The thing that gets me is that they have this email being sent out, when it should be automated. Those coins are probably all laundered already. Happened at light speed dontchaknow.

Justin Case's picture

If this were a big enough deal I'd expect to see an uptick in gold

I wouldn't expect that at all. Maybe a cash position, or another vapour coin until the fire's out and then dive back in the swamp. Less costs than jumping all over and hoping gold doesn't drop while waiting. Just lock in cash for a few hrs. is a smarter, cheaper move.

LostandFound's picture

BitShares surged during this time, mainly because it offers an alterantive to being 'Tethered' they have BitAssets which allow you to enter the market with Fiat and also Hedge against volatility, a true decentralised banking eco system not centralised like Tether. If you are long blockchain, then you need to be in BitShares. 

roodeetoodee's picture

Why do all stocks dip when someone suggests nuclear war? Uncertainty. 

Why all at the same time? Automation aka bots.

Nothing to see here. Move along.

Spaced Out's picture

Fears about Tether are overblown, as btc's quick recovery has demonstrated.

BTC is now innoculated against Tether. Find another hobbyhorse quick.

tmosley's picture

Whistling past the graveyard.

tmosley's picture

You don't need an argument to respond to a non-argument.

And you'd have to be pretty damn deep in denial to think that this is the end of the problems with Tether. This isn't even the beginning, unless it is a cover up. Don't see the motivation for that at this time though.

Spaced Out's picture

"you'd have to be pretty damn deep in denial to think that this is the end of the problems with Tether"

Nobody said "this is the end of the problems with Tether". Where did you get that from? Tether, along with almost all altcoins, is self-evidently irrelevant to bitcoin's fortunes, as my last post posited, which is why you need to find a new hobbyhorse.

Incidentally, Rick Falkvinge, the guy you were linking to all last week in support of your last hobbyhorse BCH, said this today: "bitcoin is the future of finance".

I wonder what you'll be banging on about tomorrow? It's anyone's guess...........(though I strongly suspect it'll be whatever you read on Reddit tonight) :D

 

roodeetoodee's picture

Think Bolivar vrs USD.

Is the US dollar about to crash because the Venuzulan economy is in the toilet?

blentus's picture

Ethereum is a brilliant idea being implemented by incompetent people.

It still has a chance to change, though.