Bitcoin, Ripple and Ethereum prices plunged more than 10% this morning after the South Korean cryptocurrency exchange Coinrail was hacked over the weekend.

Bitcoin lost $500 in the space of an hour to trade at $6,627 while EOS, the token backed by Block.one, lost 20% in value. Ripple and Ethereum fell 11%.

Coinrail said on Sunday that several alternative versions of bitcoin seem to have been stolen during a cyber attack this weekend. Since then the exchange has moved 70% of its digital assets to a cold wallet – a storage which can’t be accessed via the internet. Coinrail is now trying to trace its lost assets which are estimated to in the range of $40 million.

Although cyber security remains the cryptocurrencies’ achilles’ heel, Bitcoin prices are likely to bounce back from this particular attack because Coinrail is a relatively small exchange and is ranked outside the world’s top 80 crypto exchanges.

The longer term picture, however, may be another matter

Bitcoin to benefit from lower volatility

“There can be no doubt that the moves seen in Bitcoin and other crypto-currencies from the summer of 2017 through to February 2018 have all the hallmarks of a classic bubble – and corresponding bust,” says David Jones, Chief Market Strategist at Capital.com.

But since the bust, weekly volatility in Bitcoin hit a one year low below 3% roughly at the same time as the NASDAQ, that barometer of technology stocks, moved out to fresh all-time highs.

Jones argues that the volatility is evaporating because a lot of the hype about cryptocurrencies being the easy money has gone. Plenty of latecomers to the rally have had their fingers burnt and activity amongst the wider public has slowed. Also, the market has become more transparent with the introduction of listed Bitcoin futures.

“Now, institutions and more professional investors have a regulated way of gaining exposure to bitcoin without having to worry about online wallets and lack of security,” says Jones. The futures contract also provides the option to “sell short” and to profit from falling bitcoin prices. This has no doubt gone some way to initiate a more orderly two-way trade making it more like most other markets.

Although the boom and bust is over, at least for the moment, it could end up being one of the best things to happen for the future of crypto currencies, says Jones.

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Commodities and Shares Editor
11th June 2018
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