Bitcoin Drops Nearly 20% as Exchange Hack Amplifies Price Decline

The price of bitcoin fell sharply today exacerbating an already ongoing decline as global market participants reacted to news that one of the largest digital currency exchanges had been hacked.

Earlier this afternoon, Hong Kong-based exchange Bitfinex halted trading after discovering a security breach, which included taking its website offline and pausing all withdrawals and deposits. Representatives from the exchange told CoinDesk engineers were seeking to uncover issues at press time, though the company had confirmed roughly 120,000 BTC (more than $60m)was lost or stolen via social media.

In response, bitcoin prices fell to $560.16 by 19:30 UTC, $530 by 23:30 and $480 at press time, CoinDesk USD Bitcoin Price Index (BPI) data reveals.

This price was roughly 20% lower than the day’s opening of $607.37 and 27% below the high of $658.28 reached on Saturday, 30th July, when the digital currency began pushing lower.

Arthur Hayes, CEO of bitcoin leverage trading firm BitMEX, emphasized that this event had a clear and measurable effect on bitcoin prices.

He told CoinDesk:

"A high profile hack is not good for sentiment and curtails the ability for market makers to keep an orderly market."

Market observer and trader Jacob Eliosoff provided similar input, telling CoinDesk that the event had sparked a new wave of uncertainty.

"The big question will be how much was stolen and whether Bitfinex will make customers whole," he said.

Market participants traded more than 600,000 BTC via Bitfinex during the 30 days through 2nd August, Bitcoinity data reveals. This figure represented represented 1.6% of the more than 39m BTC transacted through various exchanges during the 30-day period.

The halving's impact

However, the price decline does not appear to be the sole result of the issues at Bitfinex.

Bitcoin prices experienced a gradual, downward movement over the course of several days, with market observers pointing to the halving of rewards on the bitcoin network as the cause. This event – which saw a 50% reduction in the mining subsidy on the network – generated significant visibility when it took place 9th July.

At the time, there was no major change in bitcoin prices, despite expectations that such a move may have been probable.

"It looks like traders got a bit ahead of themselves thinking that the price would go in a straight line after the halving," said analyst Tuur Demeester. "The halving is real and will have real effects."

One such effect is profit taking. Petar Zivkovksi, director of operations for full-service bitcoin trading platform Whaleclub, spoke to this development, noting his belief this trend was "in full effect" after the halving.

Still, he suggested the impact could be limited due to existing market support.

"There are still plenty of ‘stubborn’ longs open," he added.

Search for meaning

The drop below $600 may also indicate a change from the bullish sentiment that has so far characterized 2016.

For example, Joe Lee, founder of leveraged derivatives trading platform Magnr, stated that bitcoin's drop below $600 could indicate that the currency's long-term fundamentals are weak.

He emphasized that market observers would be watching bitcoin prices "to see how much of bitcoin’s steady growth has come from long-term holders".

Going forward, market observers also offered predictions on where bitcoin prices will go next. Now that the digital currency has breached $600, it will test $550, its low before the Brexit vote, said Hayes.

Tim Enneking, chairmain of cryptocurrency investment manager EAM, interpreted the recent price decline as evidence of a post-halving fallback, further stating that bitcoin will find support above $500.

Zivkovksi told CoinDesk that the digital currency’s decline below $600 “could signal the start of a medium term bearish trend powered by a strong long squeeze and a lull in bitcoin interest by the general public.”

While these analysts pointed to future weakness in the digital currency and potential declines, Demeester emphasized that not only did he not "see any sign why this bull market is over,” but he expected the price would "go a lot higher over the next 12 months".

Bitcoin Geocaching Game Takara Adds Support for Counterparty Tokens

The first ever Bitcoin geocaching iOS app, Takara, has added support for Counterparty assets, allowing users to hunt and plant bitcoin treasures around the world, using IndieSquare’s API.

Developed by Christian Moss of MandelDuck, users will have the ability to not only find Counterparty tokens, but also bitcoins when they get close enough to them. It’s similar to PokemonGo; however, the only difference is that instead of Pokemon, users will be collecting bitcoins and various tokens that represent different items such as tickets, coupons, company stocks or loyalty points.

Speaking to CCN, lead developer Christian Moss of MandelDuck, said that with Takara adding support for Counterparty tokens this was the start of digital property rather than virtual assets tied to a single use case.

I think it shows how game items can be liberated from a single parent game, for example using Counterparty, Spells of Genesis have made a game item that can be used in Spells of Genesis, used in SaruTobi, geocached in Takara, and traded on a decentralized exchange.

MandelDuck is also behind games such as SaruTobi, Game of Birds and KA-GE.

To prevent users from stealing bitcoin Takara, Moss explained that users should remember that once they drop the Takara, they are essentially giving up ownership of the coins.

He added:

Having said that, users always keep a copy of the private key to any takara they create so they can access the bitcoin at any point before it is collected by a user. This offers protection in case the app is removed by Apple or the service is stopped for whatever reason.

Takara Attracts Regular People to Bitcoin

The gaming world continues to be a popular pastime for all ages, but if an individual hasn’t heard of blockchain technology or bitcoin before, this could be the perfect way for them to experience an innovative technology.

Speaking to CCN, co-founder of IndieSquare, Koji Higashi, said that the popularity of PokemonGo was a good example of getting people involved in the gaming industry that would help to push the wider adoption of Bitcoin too.

He said:

If we can somehow insert blockchain into the equation, say being able to trade their Pokemon securely on the blockchain with other players, that alone can easily be a killer app for Bitcoin.

Not only that but in-game assets present the chance to create advanced video game economies containing value that is fungible in the real world. This is seen in games such as World of Warcraft Gold and Counter Strike where Global Offensive skins are used as value stores in the game economies.

Speaking to CCN, director of the Counterparty Foundation, Trevor Altpeter said that the use of Counterparty delivers an improved version for the gaming world.

Counterparty assets are an improvement over the existing model, offering enhanced functionality, while also reducing counterparty risk inherent to the current centralized custody of these assets that ultimately limits their utility and value in the real world.

Liberland: Bitcoin ‘Is Truly the Base of Our Economy’

Bitcoin.com had a chance to discuss some topics with the Liberland president Vít Jedlička concerning the many topics the micronation faces, the citizens use of Bitcoin and goals the group has for Liberland’s future.

Also read: The Digital Revolution Increases Sovereignty

The Free Republic of Liberland is a self-proclaimed micronation founded in April 13, 2015. The proclamation of the state’s independence was initiated by the Czech libertarian political activist, Vít Jedlička.

Located between Croatia and Serbia on the western bank of the Danube river, the tiny nation has brought about many discussions concerning micronations and secessions. Jedlička and Liberland’s citizens are strong proponents of free markets, and the use of the decentralized cryptocurrency Bitcoin are included among many other non-traditional beliefs.

“Bitcoin.com is supportive of Liberland both philosophically and financially,” and hopes the movement continues to be successful, Bitcoin angel investor, Roger Ver, said.

The Free Republic of Liberland Continues to Progress

Bitcoin.com (BC): Can you tell our readers about Liberland and how it’s going there?

Vít Jedlička (VJ): It is doing great! There is permanent settlement group working on preparing everything on moving in. They control territory now. Very soon you will be able to see beautiful drone pictures. We have now seventy-five representative offices around the world. I’m just flying back from Malta where we will have a very strong presence. Our legal system is close to completion, and I am proud it will be most libertarian one on this planet. We appreciate today’s approach of Croatia which strictly protects our borders we hope to develop a very friendly relationship with the new government that will be formed in September. We are extremely grateful for the support that Bitcoin.com and Roger Ver gave to Liberland. We hope that many more important supporters will have the courage to step out and will help Liberland to move forward.