First Mover: Why Bitcoin Traders Couldn’t Give a Sat About the Twitter Hack
Cryptocurrency traders yawned at one of the yearâs biggest news stories for bitcoin, with prices barely budging as the digital-asset industry became a primary victim of this weekâs massive hack on Twitter accounts.
The notoriously volatile bitcoin slid just 0.8% to about $9,100Â on Thursday after slipping a meager 0.7% on Wednesday as the news hit. Thatâs in a market where itâs not uncommon,Â at least until recently, forÂ prices to swing 8% in a day.Â Â
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âItâs a non-event for price,â Matt Blom, head of sales and trading for the cryptocurrency firmÂ Diginex, told First Mover in an email.
Scamming people out of their bitcoinÂ was, at least on the surface, the goal of what the social-media platform called a âcoordinated social engineering attack.â The hackers took over the Twitter accounts of the cryptocurrency exchanges Binance, Coinbase and Gemini, as well as those of celebrities including former Vice President Joe Biden and Microsoft founder Bill Gates. CoinDesk got hit, too.
As clues on the attack continue to trickle out, cryptocurrency analystsÂ haveÂ begun toÂ unpackÂ the market implications for bitcoin â some positiveÂ and some negativeÂ âÂ and why it all washes out.
âI think you did not see muchÂ market reaction becauseÂ it was unclear what narrative would develop following the breach, and so traders were frozen,â John Todaro, of the cryptocurrency research firm TradeBlock, wrote in an email.Â
1) The scale of the bitcoin obtained was relatively small. PRICE IMPACT: NEUTRAL.Â
TheÂ bitcoin obtained through the hack amounted to roughlyÂ $120,000, a tiny fraction of theÂ cryptocurrencyâs $168 billion market capitalization. Less than oneÂ 10-millionth, in fact. Thatâs not too far off from the scale of the satoshi, or âsat,â which is the smallest unit of bitcoin, at oneÂ 100-millionth. Last year alone, there were at leastÂ seven major cryptocurrency exchange hacks, includingÂ $40 million from BinanceÂ andÂ $49 million fromÂ South KoreaâsÂ Upbit.Â Â
âThe one thing that could have made it a bigger deal is if the hackers got more than $100K,â Martin Garcia, managing director at the cryptocurrency trading firm Genesis, wrote in an email. âIf they had raised like $100 million, then I guarantee BTC would have sold off, as the market would have expected the hackers to sell to fiat somewhere, crushing the price.Â But given the amount, no big deal.â
(Genesis is owned by the investment firm Digital Currency Group, which also owns CoinDesk.)Â
2) No publicity is bad publicity.Â PRICE IMPACT: POSITIVE.Â
The episode could aid bitcoinâs name recognition, which theoretically couldÂ accelerate consumer adoption, at least on the margin. News articles aboutÂ the hack appeared in theÂ New York Times,Â Wall Street JournalÂ and many other mainstream U.S. publications. The storyÂ wasÂ widely discussed on Twitter. Interest in theÂ keyword âbitcoinâ briefly surged on Google.Â
âWhile I donât condone the incident in any way, I must admit Iâm pleased to see the rapid surge in popularity of bitcoin it has caused,â Jay Hao, CEO of the cryptocurrency exchange OKEx,Â wroteÂ in a post on LinkedIn. âThe hack itself is unfortunate, of course, butÂ thanks to Twitter, bitcoin is grabbing the headlines again, and that can only be a good thing in the push to wider adoption.â
3) The episode could invite further regulatory and law-enforcementÂ scrutiny of bitcoin and other cryptocurrencies. PRICE IMPACT: NEGATIVE.Â
The FBIÂ said Thursday itâs investigating the event.Â U.S. Senator Josh Hawley, a Missouri Republican, called on Twitter toÂ cooperate. New York Governor Andrew CuomoÂ directed the state to conduct a full investigation.
âYesterdayâs attack targeted the Twitter accounts of virtual currency companies,â Linda Lacewell, superintendent of the New York Department of Financial Services, said in a statement. âThe department will leverage its deep expertise to bring the facts to light.â
4) The attack highlightsÂ the benefits of bitcoinâs decentralized network. PRICE IMPACT: POSITIVE.Â
The fact Twitterâs systems appear to have been hacked could redirect attention to the fact that the Bitcoin blockchain isÂ aÂ distributed networkÂ of computers, reducing central points of failure or weakness.Â
âIt showcases weaknesses in centralized systems and a need for more decentralized applications,â Lennard Neo, head of research at Stack Funds, told First Mover in a WhatsApp message.Â
5) Early efforts to track down the perpetrator and scammed bitcoin highlight the transparency ofÂ the blockchain network. PRICE IMPACT: POSITIVE.Â
Private cryptocurrency-forensic firms including Chainalysis, CipherTrace and Elliptic have already started to probe the event, using publicly available data from the Bitcoin blockchain. As reported by CoinDeskâs Will Foxley, it appears the hacker was aÂ trader on the cryptoÂ derivatives exchange BitMEX, and itâsÂ prettyÂ straightforward to document the inflows of bitcoin into the hackerâs listedÂ account addressÂ as the scam unfolded.Â
âYou can track the crypto coming into the hacker crypto addresses,â the Binance-owned data website CoinMarketCapÂ wrote Thursday in a blog post.Â
6) Bitcoin is worth stealing. PRICE IMPACT: POSITIVE.
The billionaire investor Warren Buffett has said that bitcoin has âno value.â If that was the case, why steal it?Â
âIf anything, it just proves that bitcoin is a form of a valuable money that a hacker might want,â Jeff Dorman, chief investment officer of the cryptocurrency investment managerÂ Arca, told First Mover in an email.Â
7) Cryptocurrency is so frequently used in scams thatÂ the latest episode isnât really all that surprising. PRICE IMPACT: NEUTRAL.Â
âTo say that everybodyÂ now knows that hackers prefer bitcoin has noÂ effect, because everybody knows that already,â Mati Greenspan, founder of the cryptocurrency research firm Quantum Economics, said in a phone interview.Â
8) The event could raise awareness of the imperative for security precautions among new cryptocurrency investors. It also might scare some would-be investors away. PRICE IMPACT: NEUTRAL.
CoinDeskâs Leigh Cuen reported Thursday that many authentic Twitter users were no longer able toÂ tweet bitcoin addresses.Â
âThat has a huge silver lining, because itâs not good practice to publish your public key,â Greenspan said. âThatâll probably save a couple noobs from making noob mistakes.â
Tweet of the day
BTC: Price: $9,115 (BPI) | 24-Hr High: $9,157Â | 24-Hr Low: $9,066
Trend:Â Bitcoin continues to stubbornly trade within a tight range above $9,000. The leading cryptocurrency hasnât had a 5% daily move for 24 straight days, the longest stretch of such low daily volatility sinceÂ the end of March 2019.
Prolonged periods of price consolidation tend to end with a sudden violent move on either side. So far, however, the cryptocurrencyÂ has refused to wake from its multi-month slumber.Â
Technical studies indicate scope for a price drop in the short-term. For instance, the four-hour chart shows a failed breakout, a bearish sign. Meanwhile, the daily chart MACD histogram, an indicator used to identify trend strength andÂ trend changes, has crossed below zero in favor of the bears.Â
In addition, put options (or bearish bets) expiring in one- and three-monthsÂ are drawing higher pricesÂ (or stronger demand) than call options (or bullish bets). As such, it seems traders are anticipating a sell-off.Â
Immediate support is located at $9,000, which if breached, would shift the focus to $8,630 â the support of the higher low created on May 27. Meanwhile, resistance is seen at $9,480 (July 8 high). A move above that level is needed to invalidate a bearish lower-highs setup on theÂ 4-hour chart and open the doors for $9,800-$10,000.
- Crypto Long & Short: Why the Twitter Hack Was Good for Bitcoin (and Itâs Not the Media Attention)
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