Bitcoin Plunges After Digital Currency Exchange was Hacked

The world’s largest dollar-based exchange for bitcoin was hacked on Tuesday. Bitfinex announced that nearly 120,000 units of bitcoin, valued at close to $72 million, were stolen during a security breach.

After the news broke, the digital currency dropped more than 23 percent. The number of units stolen represents roughly 0.75 percent of bitcoin currently in circulation.

The Hong Kong-based exchange suspended trading on Tuesday. It is conducting its own investigation, and is also cooperating with local authorities. Zane Tackett, Director of Community & Product Development for Bitfinex, said the company has yet to determine how it will address customer losses.

For many, the attack is a reminder of how dangerous it can be to invest in the digital currency. In 2014, a Tokyo-based exchange called MtGox suffered a security breach that resulted in over $650 million in losses for its bitcoin customers. MtGox was forced to file for bankruptcy shortly after the hack.

In November of 2013, bitcoin traded at $1216 per unit. Today, it trades near $550 per unit, down 55 percent from its all-time high.

Mr. Tackett does not believe the hack exposed any weaknesses in the company’s technology, and says that Bitfinex is almost 100 percent certain that it was not an inside job.

Leonhard Weese, president of the Hong Kong Bitcoin Association, suggested that the key to protecting information is to chop it into so many tiny pieces that it isn’t worth a hacker’s time.

“For an attacker, the cost-benefit strategy is quite easy: How much is in the pot and how likely is it that I’m getting the pot?” Mr. Weese said.